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StudioBuzz.com LLC Agreement 03-28-2000
LIMITED LIABILITY COMPANY AGREEMENT
OF
STUDIOBUZZ.COM,
LLC
A DELAWARE LIMITED
LIABILITY COMPANY
THE
SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES
ACT OF 1933 NOR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES
LAWS.
SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,
TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER
APPLICABLE
STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE OPINION OF
COUNSEL
SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND REGISTRATION IS NOT
REQUIRED.
ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS AGREEMENT IS
FURTHER
SUBJECT TO OTHER RESTRICTIONS, THE TERMS AND CONDITIONS OF WHICH ARE SET
FORTH
IN THIS AGREEMENT.
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TABLE OF CONTENTS
PAGE
----
ARTICLE
I
DEFINITIONS..............................................................................1
1.1 "Act".........................................................................................1
1.2 "Adjusted Capital
Account"....................................................................2
1.3 "Adjusted Capital
Contribution"...............................................................2
1.4
"Affiliate"...................................................................................2
1.5
"Agreement"...................................................................................2
1.6 "Affected
Interest"...........................................................................2
1.7
"Bankruptcy"..................................................................................2
1.8 "Bona Fide
Offer".............................................................................2
1.9 "Capital
Account".............................................................................2
1.10 "Capital
Contribution"........................................................................3
1.11 "Certificate of
Formation"....................................................................3
1.12
"Closing".....................................................................................3
1.13
"Code"........................................................................................3
1.14
"Company".....................................................................................3
1.15 "Company Minimum
Gain"........................................................................3
1.16 "Confidential
Information"....................................................................3
1.17 "Contribution
Cap"............................................................................4
1.18 "Distributable
Cash"..........................................................................4
1.19 "Distribution"................................................................................4
1.20 "Economic
Interest"...........................................................................4
1.21 "Economic Interest Holder"....................................................................4
1.22 "Economic Risk of
Loss".......................................................................4
1.23 "Eligible
Members"............................................................................4
1.24 "Fair Market
Value"...........................................................................4
1.25 "Fiscal
Year".................................................................................4
1.26 "Former
Member"...............................................................................5
1.27 "Former Member's
Interest"....................................................................5
1.28
"Interest
Holder".............................................................................5
1.29 "Joint
Designee"..............................................................................5
1.30 "Majority in Interest"........................................................................5
1.31
"Managers"....................................................................................5
1.32
"MediaChase"..................................................................................5
1.33 "MediaChase Consulting
Agreement".............................................................5
1.34
"Member"......................................................................................5
1.35 "Member Minimum
Gain".........................................................................5
1.36 "Member Nonrecourse
Debt".....................................................................5
1.37 "Member Nonrecourse
Deductions"...............................................................5
1.38 "Membership
Interest".........................................................................5
1.39 "Membership Termination Event"................................................................6
1.40 "Net Profits"and "Net
Losses".................................................................6
1.41 "Noncompete
Date".............................................................................6
1.42 "Nonrecourse
Deductions"......................................................................6
1.43 "Nonrecourse
Liability".......................................................................6
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Page(s)
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1.44
"Notice"......................................................................................6
1.45 "Offered
Interest"............................................................................6
1.46
"Onlinefilmsales".............................................................................6
1.47 "Person"......................................................................................6
1.48 "Preferred
Return"............................................................................6
1.49 "Preferred Return Account"....................................................................7
1.50 "Securities
Act"..............................................................................7
1.51 "Tax
Credits".................................................................................7
1.52 "Tax Matters
Partner".........................................................................7
1.53
"Transfer"....................................................................................7
1.54 "Treasury
Regulations"........................................................................7
1.55 "United States Bankruptcy
Code"...............................................................7
1.56 "Unpaid Preferred
Return".....................................................................7
1.57 "Voting
Interest".............................................................................7
ARTICLE
II ORGANIZATIONAL MATTERS...................................................................8
2.1
Name..........................................................................................8
2.2
Term..........................................................................................8
2.3 Office and
Agent..............................................................................8
2.4 Purpose of
Company............................................................................8
2.5
Intent........................................................................................8
2.6
Members.......................................................................................8
2.7
Formation
Expenses............................................................................8
ARTICLE
III CAPITAL
CONTRIBUTIONS....................................................................9
3.1 Initial Capital Contributions.................................................................9
3.2 Additional Capital
Contributions..............................................................9
(a) Additional Contributions by
Onlinefilmsales..............................................9
(b) Additional
Capital.......................................................................9
3.3 Capital
Accounts..............................................................................9
3.4 No Withdrawals of
Capital.....................................................................9
3.5 Loans; No
Compensation........................................................................9
ARTICLE
IV MEMBERS..................................................................................9
4.1 Admission of Additional
Members...............................................................9
4.2 Withdrawals or Resignations..................................................................10
4.3 Members Are Not
Agents.......................................................................10
4.4 Meetings of Members; Written
Consent.........................................................10
ARTICLE
V MANAGEMENT AND CONTROL OF
THE COMPANY...................................................10
5.1 Management of the Company by the
Managers....................................................10
(a) Exclusive Management by the
Managers....................................................10
(b) Powers of the
Managers..................................................................11
(c)
Agency Authority of the Managers; Delegation by the
Managers............................12
(d) Discretion of the
Managers..............................................................12
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(e) Performance of Duties; Liability of
Managers............................................12
(f) Devotion of Time........................................................................12
(g) Decisions of the
Managers...............................................................12
(h) Meetings of
Managers....................................................................13
5.2 Election of
Managers.........................................................................13
(a) Number and
Term.........................................................................13
(b)
Vacancies...............................................................................13
5.3 Limitations on Power of the
Managers.........................................................13
5.4 Members Have No Managerial
Authority.........................................................14
5.5 Transactions between the Company and the
Managers, the Members or their Affiliates...........14
(a) Contracts with Affiliates...............................................................14
(b) Contracts with Managers or Affiliates of the
Managers...................................15
(c) Treatment of Affiliate Loans and
Fees...................................................15
5.6
Officers.....................................................................................15
(a) Appointment of
Officers.................................................................15
(b) Signing Authority of
Officers...........................................................15
(c) Acts of Officers as Conclusive Evidence of
Authority....................................15
5.7 Competing
Activities.........................................................................16
5.8 Payments to Managers and
Others..............................................................16
5.9 Expenses.....................................................................................16
ARTICLE
VI ALLOCATIONS OF NET
PROFITS, NET LOSSES AND DISTRIBUTIONS................................17
6.1 Minimum Gain
Chargeback......................................................................17
6.2 Member Minimum Gain
Chargeback...............................................................17
6.3 Qualified Income Offset......................................................................17
6.4 Nonrecourse
Deductions.......................................................................17
6.5 Member Nonrecourse
Deductions................................................................17
6.6 Allocation of Net
Profits....................................................................17
6.7 Allocation of Net
Losses.....................................................................18
6.8 Distributions by the
Company.................................................................18
6.9 Allocation of Net Profits and Losses and
Distributions in Respect of a Transferred
Interest.....................................................................................18
6.10 Tax Allocation
Matters.......................................................................18
(a) Contributed or Revalued Property........................................................18
(b) Recapture
Items.........................................................................19
6.11 Order of
Application.........................................................................19
6.12 Allocation of
Liabilities....................................................................19
6.13 Form of
Distribution.........................................................................19
ARTICLE
VII TRANSFER OF
INTERESTS...................................................................20
7.1 Transfer of
Interests........................................................................20
7.2 [intentionally
omitted]......................................................................20
7.3 Right of First
Refusal.......................................................................20
7.4 [intentionally omitted]......................................................................21
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Page(s)
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7.5 [intentionally omitted]......................................................................21
7.6 [intentionally
omitted]......................................................................21
7.7 Repurchase Restrictions Imposed by
Law.......................................................21
7.8 Further Restrictions on Transfer of
Interests................................................21
7.9 Substitution of
Members......................................................................21
7.10
Enforcement..................................................................................22
7.11 Effect of Transfers in Violation of
Agreement................................................22
ARTICLE
VIII CONSEQUENCES OF MEMBERSHIP
TERMINATION EVENTS...........................................22
8.1 Dissolution of
Company.......................................................................22
8.2 Admission or Conversion......................................................................22
8.3 Terms of
Transfer............................................................................23
(a) Transferee Bound by
Agreement...........................................................23
(b) Notice of Repurchase
Event..............................................................23
(c) Option to
Purchase......................................................................23
(d) Purchase
Price..........................................................................24
(e) Payment of Purchase
Price...............................................................24
(f) Consummation of
Sale....................................................................25
ARTICLE
IX ACCOUNTING, RECORDS,
REPORTING BY MEMBERS...............................................25
9.1 Books and Records............................................................................25
9.2 Reports; Annual
Statements...................................................................26
(a) Governmental
Reports....................................................................26
(b) Financial
Reports.......................................................................26
(c) Tax
Reports.............................................................................27
9.3 Bank Accounts; Invested
Funds................................................................27
9.4 Tax Matters for the Company Handled by
Tax Matters Partner...................................27
9.5 Accounting
Matters...........................................................................27
9.6
Confidentiality..............................................................................27
ARTICLE
X DISSOLUTION AND WINDING
UP..............................................................28
10.1
Dissolution..................................................................................28
10.2 Date of
Dissolution..........................................................................28
10.3 Winding
Up...................................................................................28
10.4 Liquidating Distributions to Economic
Interest Holders.......................................29
10.5 Distributions in
Kind........................................................................29
10.6 Provision for Debts and Liabilities..........................................................29
10.7 No
Liability.................................................................................29
10.8 Limitations on Payments Made in
Dissolution..................................................29
10.9 Certificate of
Cancellation..................................................................30
10.10 Compensation for
Services....................................................................30
ARTICLE
XI LIMITATION OF LIABILITY;
STANDARD OF CARE; INDEMNIFICATION..............................30
11.1 Limitation of
Liability......................................................................30
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Page(s)
11.2 Standard of
Care.............................................................................30
11.3
Indemnification..............................................................................30
11.4 Contract Right;
Expenses.....................................................................31
11.5 Indemnification of Employees and
Agents......................................................31
11.6 Nonexclusive Right...........................................................................31
11.7
Severability.................................................................................31
11.8
Insurance....................................................................................31
ARTICLE
XII REPRESENTATIONS OF THE
MEMBERS..........................................................31
12.1 Preexisting Relationship or
Experience.......................................................32
12.2 Access to
Information........................................................................32
12.3 Economic
Risk................................................................................32
12.4 Investment
Intent............................................................................32
12.5 Consultation with
Attorney...................................................................32
12.6 Purpose of Entity............................................................................32
12.7
Residency....................................................................................32
12.8 No
Advertising...............................................................................32
12.9 Membership Interest is Restricted
Security...................................................32
12.10 No Registration of Membership
Interest.......................................................33
12.11
Organization.................................................................................33
12.12
Authority....................................................................................33
12.13 Enforceability...............................................................................33
12.14 No
Violation.................................................................................33
ARTICLE
XIII MISCELLANEOUS...........................................................................33
13.1 Legal
Counsel................................................................................33
13.2
Amendments...................................................................................34
13.3 Offset
Privilege.............................................................................34
13.4 Arbitration..................................................................................34
(a)
General.................................................................................34
(b) Governing Law...........................................................................34
(c) Costs of
Arbitration....................................................................34
13.5 Remedies
Cumulative..........................................................................34
13.6
Notices......................................................................................34
13.7
Attorneys'Fees...............................................................................35
13.8 Governing Law;
Jurisdiction..................................................................35
13.9 Complete
Agreement...........................................................................35
13.10
No Third-Party
Rights........................................................................35
13.11 Binding
Effect...............................................................................35
13.12 Section Headings.............................................................................36
13.13
Interpretation...............................................................................36
13.14
Severability.................................................................................36
13.15 Multiple
Counterparts........................................................................36
v
<PAGE>
LIMITED LIABILITY COMPANY
AGREEMENT
OF
STUDIOBUZZ.COM,
LLC
A DELAWARE LIMITED
LIABILITY COMPANY
This Limited Liability Company
Agreement is made as of March 28, 2000,
by
and between Onlinefilmsales.com, LLC, a Delaware limited liability company
("Onlinefilmsales"),
and MediaChase Ltd., a Delaware corporation ("MediaChase"),
with
reference to the following facts:
A. StudioBuzz.com, LLC (the
"Company") was formed on March 17, 2000,
as
a limited liability company under the laws of the State of Delaware by
filing
a Certificate of Formation for the Company with the Delaware Secretary
of
State.
B. MediaChase heretofore contributed
to the capital of the Company, all
of
its right, title and interest in and to any assets of MediaChase used solely
in
connection with the operation of the business entitled
"StudioBuzz.com"
(collectively,
the "StudioBuzz Assets") in consideration of the issuance by the
Company
to MediaChase of a one hundred percent (100%) Membership Interest in the
Company.
C. Concurrently herewith, MediaChase
is contributing to
Onlinefilmsales,
a fifty percent (50%) Economic Interest and a 100% Voting
Interest
in the Company, in consideration of (i) the issuance by Onlinefilmsales
to
MediaChase of an interest in Onlinefilmsales (as more fully described in that
certain
Limited Liability Company Agreement of Onlinefilmsales.com, LLC, of even
date
herewith), and (ii) the agreement by Onlinefilmsales herein to make
additional
contributions to the capital of the Company upon the satisfaction of
certain
conditions stated.
D. The parties now desire to adopt a
limited liability company
agreement
to govern their respective rights and obligations as Members of the
Company.
NOW, THEREFORE, in consideration of
the mutual covenants contained
herein
and for other good and valuable consideration, the receipt of which is
acknowledged,
the parties agree that the following shall be the Limited
Liability
Company Agreement of the Company.
ARTICLE
I
DEFINITIONS
When used in this Agreement, the
following terms have the following
meanings:
1.1 "ACT" means the Limited
Liability Company Act of the State of
Delaware.
<PAGE>
1.2 "ADJUSTED CAPITAL ACCOUNT"
of an Economic Interest Holder means the
Capital
Account of that Economic Interest Holder increased by the Economic
Interest
Holder's share of Company Minimum Gain and Member Minimum Gain.
1.3 "ADJUSTED CAPITAL
CONTRIBUTION" of an Economic Interest Holder means
the
excess of (a) that Economic Interest Holder's Capital Contributions to the
Company,
over (b) Distributions to that Economic Interest Holder that are a
return
of Capital Contributions under Section 6.8(b).
1.4 "AFFILIATE" of a Member or
Manager means (a) a Person directly or
indirectly
(through one or more intermediaries) controlling, controlled by or
under
common control with that Member or Manager; (b) a Person owning or
controlling
ten percent (10%) or more of the outstanding voting securities or
beneficial
interests of that Member or Manager; or (c) an officer, director,
partner
or member, or a member of the immediate family of an officer, director,
partner
or member, of that Member or Manager. For these purposes "control"
means
the
possession, direct or indirect, of the power to direct or cause the
direction
of the management and policies of a Person, whether through the
ownership
of voting securities, by contract or otherwise.
1.5 "AGREEMENT" means this
Limited Liability Company Agreement of
StudioBuzz.com,
LLC.
1.6 "AFFECTED INTEREST" has the meaning specified in Section
8.3.
1.7 "BANKRUPTCY" of a Member
means the institution of any proceedings
under
any federal or state law for the relief of debtors, including the filing
by
or against that Member of a voluntary or involuntary case under the United
States
Bankruptcy Code, which proceedings, if involuntary, are not dismissed
within
sixty (60) days after their filing; an assignment of the property of that
Member
for the benefit of creditors; the appointment of a receiver, trustee or
conservator
of any substantial portion of the assets of that Member, which
appointment,
if obtained ex parte, is not dismissed within sixty (60) days
thereafter;
the seizure by a sheriff, receiver, trustee or conservator of any
substantial
portion of the assets of that Member; the failure by that Member
generally
to pay its debts as they become due within the meaning of Section
303(h)(1)
of the United States Bankruptcy Code, as determined by the Bankruptcy
Court;
or that Member's admission in writing of its inability to pay its debts
as
they become due.
1.8 "BONA FIDE OFFER" means an
offer in writing to an Interest Holder
offering
to purchase all or any part of that Interest Holder's Membership
Interest
or Economic Interest and setting forth all of the material terms and
conditions
of the proposed purchase from an offeror who is ready, willing and
able
to consummate the purchase and who is not an Affiliate of that Interest
Holder.
1.9 "CAPITAL ACCOUNT" of an
Economic Interest Holder means the capital
account
of that Economic Interest Holder determined from the inception of the
Company
strictly in accordance with the rules set forth in Section
1.704-1(b)(2)(iv)
of the Treasury Regulations. If any Membership Interest and/or
Economic
Interest is Transferred pursuant to the terms of this Agreement, the
transferee
shall succeed to the Capital Account of the transferor to the extent
the
Capital Account is attributable to the Membership Interest and/or Economic
Interest
so
2
<PAGE>
Transferred.
In the event that assets of the Company other than cash
are
distributed to an Economic Interest Holder in kind, Capital Accounts shall
be
adjusted for the hypothetical "book" gain or loss that would have
been
realized
by the Company if the distributed assets had been sold for their fair
market
values in a cash sale (in order to reflect unrealized gain or loss). In
the
event of the liquidation of the Company, Capital Accounts shall be adjusted
for
the hypothetical "book" gain or loss that would have been realized by
the
Company
if all Company assets had been sold for their fair market values in a
cash
sale (in order to reflect unrealized gain or loss), whether as an initial
Capital
Contribution, an additional Capital Contribution, or Additional Capital.
1.10 "CAPITAL CONTRIBUTION" of
a Member, at any particular time, means
the
amount of money or property, or a promissory note or other binding
obligation
to contribute money or property, which that Member has theretofore
contributed
to the capital of the Company, whether as an initial Capital
Contribution
or an additional Capital Contribution.
1.11 "CERTIFICATE OF
FORMATION" means the Certificate of Formation of the
Company
as filed under the Act with the Delaware Secretary of State, as the same
may
be amended from time to time.
1.12 "CLOSING" has the meaning
specified in Section 8.3.
1.13 "CODE" means the Internal
Revenue Code of 1986, as amended.
1.14 "COMPANY" means
StudioBuzz.com, LLC, a Delaware limited liability
company.
1.15 "COMPANY MINIMUM GAIN"
with respect to any taxable year of the
Company
means the "partnership minimum gain" of the Company computed strictly
in
accordance
with the principles of Section 1.704-2(d) of the Treasury
Regulations.
1.16 "CONFIDENTIAL
INFORMATION" means all information or material not
generally
known by non-Company personnel which (i) gives the Company some
competitive
business advantage or the opportunity of obtaining such advantage or
the
disclosure of which could be detrimental to the interests of the Company,
(ii)
which is owned by the Company or in which the Company has an interest and
(iii)
which is (A) marked "Confidential Information," "Proprietary
Information,"
or
other similar marking, (B) known to be considered confidential and
proprietary
by the Company, or (C) from all the relevant circumstances should
reasonably
be assumed to be confidential and proprietary to the Company.
Confidential
Information includes, but is not limited to, the following types of
information
and other information of a similar nature (whether or not reduced to
writing):
trade secrets, inventions, drawings, graphics, file data,
documentation,
diagrams, specifications, know how, processes, formulas, models,
flow
charts, software in various stages of development, source codes, object
codes,
research and development procedures, research or development and test
results,
marketing techniques and materials, marketing and development plans,
price
lists, pricing policies, business plans, information relating to customers
and/or
suppliers' identities, characteristics and agreements, financial
information
and projections, and employee files. Confidential Information also
includes
any information described above which the Company obtains from another
party
and which the Company treats as proprietary or designates as Confidential
Information,
whether or not owned
3
<PAGE>
or
developed by the Company. NOTWITHSTANDING THE ABOVE, HOWEVER, NO
INFORMATION
CONSTITUTES CONFIDENTIAL INFORMATION IF IT IS GENERIC INFORMATION
OR
GENERAL KNOWLEDGE WHICH IS OTHERWISE PUBLICLY KNOWN AND IN THE PUBLIC
DOMAIN.
Also, Confidential Information shall not include any information or
material
owned by MediaChase and used by MediaChase in the ordinary course of
its
business, unless used on an exclusive basis in the business of the
Company.
1.17 "CONTRIBUTION CAP" has
the meaning specified in Section 3.2(a).
1.18 "DISTRIBUTABLE CASH" at
any time means that portion of the cash then
on
hand or in bank accounts of the Company which the Managers deem available for
Distribution
to the Economic Interest Holders, taking into account (a) the
amount
of cash required for the payment of all current expenses, liabilities and
obligations
of the Company (whether for expense items, capital expenditures,
improvements,
retirement of indebtedness or otherwise) and specifically
including
repayments of principal or interest on Contribution Loans, and (b) the
amount
of cash which the Managers deem necessary to establish reserves for the
payment
of future capital expenditures, improvements, retirements of
indebtedness,
operations and contingencies, known or unknown, liquidated or
unliquidated,
including, but not limited to, liabilities which may be incurred
in
litigation and liabilities undertaken pursuant to the indemnification
provisions
of this Agreement.
1.19 "DISTRIBUTION" means the
transfer of money or property by the
Company
to one or more Economic Interest Holders without separate consideration.
1.20 "ECONOMIC INTEREST" means
a share, expressed as a percentage, of one
or
more of the Company's Net Profits, Net Losses, Tax Credits, Distributable
Cash
or other Distributions, but does not include any other rights of a Member,
including,
without limitation, the right to vote or participate in the
management
of the Company or the right to information concerning the business
and
affairs of the Company. The Economic Interest of each Economic Interest
Holder
shall initially be the percentage set forth opposite the name of that
Economic
Interest Holder in Exhibit A and may be adjusted from time to time
thereafter
pursuant to the provisions of this Agreement, including, without
limitation,
the provisions of Sections 4.1, 4.2 and 8.1.
1.21 "ECONOMIC INTEREST
HOLDER" means the holder of an Economic Interest,
including
either a Member, to the extent of the Economic Interest constituting a
part
of its Membership Interest, or a Person who is not a member but holds
merely
a bare Economic Interest.
1.22 "ECONOMIC RISK OF LOSS"
means the economic risk of loss within the
meaning
of Section 1.752-2 of the Treasury Regulations.
1.23 "ELIGIBLE MEMBERS" has
the meaning specified in Section 7.3.
1.24 "FAIR MARKET VALUE"
means, with respect to an asset, the price at
which
that asset would be sold for cash payable at closing between a willing
buyer
and a willing seller, each having reasonable knowledge of all relevant
facts
concerning the asset and neither acting under any compulsion to buy or
sell.
1.25 "FISCAL YEAR" means the
Company's fiscal year, which shall be the
calendar
year.
4
<PAGE>
1.26 "FORMER MEMBER" has the
meaning specified in Section 8.2.
1.27 "FORMER MEMBER'S
INTEREST" has the meaning specified in Section
8.2(a).
1.28 "INTEREST HOLDER" means
either a Member or a Person who holds merely
a
bare Economic Interest.
1.29 "JOINT DESIGNEE" has the
meaning specified in Section 5.2(a).
1.30 "MAJORITY IN INTEREST"
means Voting Interests which, taken together,
exceed
fifty percent (50%) of the aggregate of all Voting Interests held by all
Members
entitled to vote or grant consent with respect to the matter in
question.
1.31 "MANAGERS" means the one
or more managers of the Company selected by
the
Members pursuant to Section 5.2(a) and shall be deemed to refer to the sole
Manager
at all times when there exists only one Manager.
1.32 "MEDIACHASE" means
MediaChase Ltd., a Delaware corporation.
1.33 "MEDIACHASE CONSULTING
AGREEMENT" means that certain Consulting
Agreement,
of even date herewith, between MediaChase and the Company.
1.34 "MEMBER" means each
Person who (a) is an initial signatory to this
Agreement,
has been admitted to the Company as a Member in accordance with this
Agreement
or is a transferee of a Member who has become a Member in accordance
with
Article VII, and (b) has not suffered a Membership Termination Event.
1.35 "MEMBER MINIMUM GAIN" has
the meaning given to the term "partner
nonrecourse
debt minimum gain" in Section 1.704-2(d) of the Treasury
Regulations.
1.36 "MEMBER NONRECOURSE DEBT"
means any "partner nonrecourse liability"
or
"partner nonrecourse debt" under Section 1.704-2(b)(4) of the
Treasury
Regulations.
Subject to the foregoing, it means any Company liability to the
extent
the liability is nonrecourse for purposes of Section 1.1001-2 of the
Treasury
Regulations and a Member (or related Person within the meaning of
Section
1.752-4(b) of the Treasury Regulations) bears the Economic Risk of Loss
under
Section 1.752-2 of the Treasury Regulations because, for example, the
Member
or related Person is the creditor or a guarantor.
1.37 "MEMBER NONRECOURSE DEDUCTIONS"
means the Company deductions, losses
and
Code Section 705(a)(2)(B) expenditures, as the case may be (as computed for
"book"
purposes), that are treated as deductions, losses and expenditures
attributable
to Member Nonrecourse Debt under Section 1.704-2(i)(2) of the
Treasury
Regulations.
1.38 "MEMBERSHIP INTEREST"
means a Member's total interest as a Member of
the
Company, including that Member's Economic Interest, its options or similar
rights
hereunder to acquire Membership Interests or Economic Interests, its
right
to inspect the books and records of the Company and its right, to the
extent
specifically provided in this Agreement or in the Act and
5
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not
otherwise restricted herein, to participate in the business, affairs and
management
of the Company and to vote or grant consent with respect to
matters
coming before the Company.
1.39 "MEMBERSHIP TERMINATION
EVENT" with respect to any Member means one
or
more of the following: the withdrawal, resignation, expulsion, dissolution or
occurrence
of any other event which terminates the continued membership of that
Member
in the Company, other than a Transfer of a Member's Membership Interest
which
is made in accordance with the provisions of Article VII.
1.40 "NET PROFITS" and
"NET LOSSES" means, for each fiscal period, the
net
income and net loss, respectively, of the Company determined strictly in
accordance
with federal income tax principles (including rules governing
depreciation
and amortization), except that in computing net income or net loss,
the
"book" value of an asset will be substituted for its adjusted tax
basis if
the
two differ; and the following items shall be excluded from the computation:
(a) any gain, income, deductions or
losses specially allocated under
Sections
6.1, 6.2 or 6.3;
(b) any Nonrecourse Deductions; and
(c) any Member Nonrecourse
Deductions.
1.41 "NONCOMPETE DATE" has the
meaning specified in Section 5.7(b).
1.42 "NONRECOURSE DEDUCTIONS"
in any fiscal period means the amount of
Company
deductions that are characterized as "nonrecourse deductions" under
Section
1.704-2(b) of the Treasury Regulations.
1.43 "NONRECOURSE LIABILITY"
means a liability treated as a "nonrecourse
liability"
under Sections 1.704-2(b)(3) and 1.752-1(a)(2) of the Treasury
Regulations.
1.44 "NOTICE" has the meaning
specified in Section 8.3.
1.45 "OFFERED INTEREST" has
the meaning specified in Section 7.3.
1.46 "ONLINEFILMSALES" means
Onlinefilmsales.com, LLC, a Delaware limited
liability
company.
1.47 "PERSON" means any
entity, corporation, company, association, joint
venture,
joint stock company, partnership, trust, limited liability company,
limited
liability partnership, real estate investment trust, organization,
individual
(including personal representatives, executors and heirs of a
deceased
individual), nation, state, government (including agencies,
departments,
bureaus, boards, divisions and instrumentalities thereof), trustee,
receiver
or liquidator.
1.48 "PREFERRED RETURN" shall
mean with respect to any Member, a
cumulative
preferential rate of return in an amount equal to seven percent (7%)
per
annum, on its Adjusted Capital Contributions.
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1.49 "PREFERRED RETURN
ACCOUNT" shall mean with respect to any Member,
the
excess of (i) that Member's Preferred Return, over (ii) all allocations to
that
Member pursuant to Section 6.6(c) below.
1.50 "SECURITIES ACT" means
the Securities Act of 1933.
1.51 "TAX CREDITS" means all
credits against income or franchise taxes
and
credits allowable to Economic Interest Holders under state, federal or other
tax
statutes.
1.52 "TAX MATTERS PARTNER"
means Onlinefilmsales, or any successor in
interest
to Onlinefilmsales' entire Membership Interest, except as otherwise
provided
in Section 9.4.
1.53 "TRANSFER" means, with
respect to a Membership Interest, an Economic
Interest
or any interest therein, the sale, assignment, transfer, disposition,
pledge,
hypothecation or encumbrance, whether direct or indirect, voluntary,
involuntary
or by operation of law, and whether or not for value, of (a) that
Membership
Interest, Economic Interest or interest therein or (b) a controlling
interest
in any Person which directly or indirectly through one or more
intermediaries
holds that Membership Interest, Economic Interest or interest
therein.
Transfer includes any transfer as a result of or in connection with any
property
settlement or judgment incident to a divorce, dissolution of marriage
or
separation, and any transfer by decree of distribution or other court order
in
proceedings arising from the death of the spouse of any Member or Economic
Interest
Holder.
1.54 "TREASURY REGULATIONS"
means the regulations of the United States
Treasury
Department pertaining to the income tax.
1.55 "UNITED STATES BANKRUPTCY
CODE" means the United States Bankruptcy
Code
at Title 11, United States Code.
1.56 "UNPAID PREFERRED RETURN"
shall mean the excess of (i) the total
cumulative
Preferred Return as of any given date over (ii) the sum of all prior
Distributions
in payment of the Preferred Return pursuant to Section 6.8(a).
1.57 "VOTING INTEREST" means a
Member's percentage right to vote on
matters
coming before the Members for action. The Voting Interest of each Member
shall
initially be the percentage set forth opposite the name of that Member in
Exhibit
A and may be adjusted from time to time thereafter pursuant to the
provisions
of this Agreement, including, without limitation, the provisions of
Sections
4.1, 4.2 and 8.1. The combined Voting Interest of all Members shall at
all
times equal one hundred percent (100%).
References in this Agreement to
"Articles," "Sections," "Exhibits" and
"Schedules"
shall be to the Articles, Sections, Exhibits and Schedules of this
Agreement,
unless otherwise specifically provided; all Exhibits and Schedules to
this
Agreement are incorporated herein by reference; any of the terms defined in
this
Agreement may, unless the context otherwise requires, be used in the
singular
or the plural and in any gender depending on the reference; the words
"herein",
"hereof" and "hereunder" and words of similar import, when
used in
this
Agreement, shall refer to this Agreement as a whole and not to any
particular
provision of this Agreement; and except as otherwise specified in
this
Agreement, all references in this Agreement (a) to any
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Person
shall be deemed to include such Person's permitted heirs, personal
representatives,
successors and assigns; and (b) to any agreement, any
document
or any other written instrument shall be a reference to such
agreement,
document or instrument together with all exhibits, schedules,
attachments
and appendices thereto, and in each case as amended, restated,
supplemented
or otherwise modified from time to time in accordance with the
terms
thereof; and (c) to any law, statute or regulation shall be deemed
references
to such law, statute or regulation as the same may be
supplemented,
amended, consolidated, superseded or modified from time to time.
ARTICLE II
ORGANIZATIONAL
MATTERS
2.1 NAME. The name of the Company shall
be "StudioBuzz.com, LLC." The
business
of the Company may be conducted under that name or, upon compliance
with
applicable law, under any other name that the Managers deem appropriate or
advisable.
2.2 TERM. The term of the Company's
existence commenced upon the filing
of
its Certificate of Formation with the Delaware Secretary of State on March
17,
2000 and shall continue until such time as it is terminated pursuant to
Article
X.
2.3 OFFICE AND AGENT. The principal
office of the Company shall be at
1351
4th Street, Suite 227, Santa Monica, CA 90401, or at such other place as
the
Managers may determine from time to time. The Company may also have such
other
offices within the State of California, or elsewhere, as the Managers may
from
time to time determine. The name and business address of the agent for
service
of process for the Company in the State of Delaware is Corporation
Service
Company, 1013 Centre Road, Wilmington, Delaware 19805, or such other
Person
as the Managers may appoint from time to time.
2.4 PURPOSE OF COMPANY. The Company may
engage in any lawful activity for
which
a limited liability company may be organized under the Act; however, its
primary
purpose shall be to engage in the following business: the creation of an
online
database with the capability to store and provide access to information
relating
to filmed entertainment rights.
2.5 INTENT. It is the intent of the
Members that the Company shall always
be
operated in a manner consistent with its treatment as a "partnership"
for
Federal
and state income tax purposes. It also is the intent of the Members that
the
Company not be operated or treated as a "partnership" for purposes of
Section
303 of the United States Bankruptcy Code. No Member or Manager shall
take
any action inconsistent with that express intent.
2.6 MEMBERS. The names, addresses,
Capital Contributions, Voting
Interests
and Economic Interests of the Members as of the date of this Agreement
are
set forth in Exhibit A.
2.7 FORMATION EXPENSES. Each Member
shall be responsible for and shall
pay
all fees and expenses incurred by it in connection with the formation of the
Company,
including, without limitation, all legal and accounting fees and
expenses
incurred by it in connection with the negotiation, preparation,
execution
and delivery of this Agreement and all related agreements
8
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and
instruments. The Company shall pay all filing fees, minimum franchise or
other
similar taxes and other governmental charges incident to its formation
and
qualification to do business.
ARTICLE III
CAPITAL
CONTRIBUTIONS
3.1 INITIAL CAPITAL CONTRIBUTIONS.
MediaChase initially has contributed
to
the Company the StudioBuzz Assets.
3.2 ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) ADDITIONAL CONTRIBUTIONS BY
ONLINEFILMSALES. Onlinefilmsales
shall
contribute such monies and/or properties which are hereafter agreed upon
by
all the Members. Immediately after such initial contribution by
Onlinefilmsales,
the Managers shall complete Exhibit A to describe each Member's
initial
Capital Contribution. In no event shall the sum of Onlinefilmsales
initial
Capital Contribution and its additional Capital Contributions exceed an
amount
hereafter to be agreed upon by all the Members ("Contribution Cap").
(b) ADDITIONAL CAPITAL. No Member
or Economic Interest Holder shall
be
required to make any additional Capital Contributions not specifically
referred
to in Section 3.1.
3.3 CAPITAL ACCOUNTS. The Company shall
establish and maintain an
individual
Capital Account for each Economic Interest Holder.
3.4 NO WITHDRAWALS OF CAPITAL. No
Economic Interest Holder shall have the
right
to withdraw or reduce its Capital Contributions in the Company except as a
result
of the dissolution of the Company or as otherwise provided in Section 4.2
or
the Act, and no Economic Interest Holder shall have the right to demand or
receive
property other than cash in return for its Capital Contributions.
3.5 LOANS; NO COMPENSATION. No Member or
Economic Interest Holder shall
be
required to lend any funds to the Company, and no Member or Economic Interest
Holder
shall have any personal liability for the repayment of any Capital
Contribution
of any other Member or Economic Interest Holder. No Member or
Economic
Interest Holder shall receive any interest, salary or drawing with
respect
to its Capital Contributions or its Capital Account or for services
rendered
on behalf of the Company or otherwise in its capacity as a Member or
Economic
Interest Holder, except as otherwise specifically provided in this
Agreement.
ARTICLE IV
MEMBERS
4.1 ADMISSION OF ADDITIONAL MEMBERS.
Subject to compliance with
applicable
law, additional Members may be admitted to the Company from time to
time
upon the unanimous written approval of all Members.
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4.2 WITHDRAWALS OR RESIGNATIONS. No
Member may withdraw or resign from
the
Company except with the prior written consent of the Managers and all other
Members
within the Prohibited Transfer Period (as defined in Section 7.1), which
consent
may be given or withheld, conditioned or delayed in the Managers' and
the
other Members' sole discretion. After the Prohibited Transfer Period, any
Member
may withdraw or resign after thirty (30) day's written notice. If the
withdrawing
or resigning Member is the last and only remaining Member, the
withdrawal
or resignation shall be effective only after the expiration of the
period
for Member consent to continue the business of the Company or dissolve,
as
provided in Section 8.1. Any withdrawal or resignation (whether prior to or
after
the Prohibited Transfer Period) of a Member shall constitute a Membership
Termination
Event (other than a Transfer made in accordance with the provisions
of
Article VII), and upon the occurrence thereof, that Member's Membership
Interest
may, at the election of the Managers, either be converted to a bare
Economic
Interest or purchased as provided in Section 8.2(c). If a Member
withdraws
in violation of this Agreement, the Member shall forfeit his, her or
its
Voting Interest and Economic Interest without further compensation. In
addition,
the Member will be liable to the Company and the other Members and/or
Economic
Interest Holders for all damages suffered by the Company and the other
Members
and/or Economic Interest Holders as a result of such withdrawal.
4.3 MEMBERS ARE NOT AGENTS. The
management of the Company is vested
exclusively
in the Managers. No Member may be an agent of the Company, nor may
any
Member, in its capacity as a Member, bind or execute any agreement,
instrument
or document on behalf of the Company without the prior written
consent
of the Managers.
4.4 MEETINGS OF MEMBERS; WRITTEN
CONSENT. The Members do not contemplate
holding
meetings; however, meetings of the Members may be held if called by the
Managers
in their sole and absolute discretion, at such times and places within
or
without the State of California as the Managers fix from time to time. No
annual
or regular meetings of Members are required, but if such meetings are
held,
they shall be noticed, held and conducted pursuant to the Act. Members may
participate
in any meeting through the use of conference telephones or similar
communications
equipment as long as all Members participating can hear one
another.
A Member so participating is deemed to be present in person at the
meeting.
Any action which may be taken by the Members at a meeting may also be
taken
without a meeting, if a consent in writing setting forth the action so
taken
is signed by Members having not less than the minimum votes that would be
necessary
to authorize that action at a meeting of the Members duly called and
noticed.
ARTICLE V
MANAGEMENT AND CONTROL OF
THE COMPANY
5.1 MANAGEMENT OF THE COMPANY BY THE
MANAGERS.
(a) EXCLUSIVE MANAGEMENT BY THE
MANAGERS. The business, property and
affairs
of the Company shall be managed exclusively by the Managers. Except for
matters
as to which the approval of the Members is expressly required by the
Act,
Section 5.3, or otherwise in this Agreement, the Managers shall have full,
complete
and exclusive authority, power and
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discretion
to manage and control the business, property and affairs of the
Company,
to make all decisions regarding those matters and to perform any and
all
other actions customary or incident to the management of the Company's
business,
property and affairs.
(b) POWERS OF THE MANAGERS. Without
limiting the generality of the
foregoing,
the Managers, acting in concert but without the need to obtain any
approval
from the Members, except only as required in Section 5.3 or otherwise
in
this Agreement or the Act, shall have the exclusive power and authority to
cause
the Company:
(i) to do any act in the conduct of its
business and to
exercise
all powers granted to a limited liability company under the Act,
whether
in the state of California or in any other state, territory, district or
possession
of the United States or any foreign country, that may be necessary,
convenient,
desirable or incidental to the accomplishment of the business
purposes
of the Company;
(ii) to own, hold, operate, maintain, finance,
refinance,
improve,
lease, sell, convey, mortgage, transfer, demolish or dispose of any
asset
as may be necessary, convenient, desirable or incidental to the
accomplishment
of the business purposes of the Company;
(iii) to enter into, perform and carry out any
contracts,
leases,
instruments, commitments, agreements or other documents of any kind,
including,
without limitation, contracts with any Member or Manager, any
Affiliate
thereof or any agent of the Company, necessary, convenient, desirable
or
incidental to the accomplishment of the business purposes of the Company;
(iv) to sue and be sued, complain and defend and
participate
in
administrative or other proceedings, in its own name;
(v) to appoint officers, employees and agents
of the Company,
define
their duties and fix their compensation, if any, and to select attorneys,
accountants,
consultants and other advisors of the Company;
(vi) to indemnify any Person in accordance with
the Act and
to
obtain any and all types of insurance;
(vii) to borrow money from any Person, and issue
evidences of
indebtedness
and to secure the same by mortgages, deeds of trust, security
agreements,
pledges, collateral assignments or other liens on the assets of the
Company;
(viii) to negotiate, enter
into, renegotiate, extend, renew,
terminate,
modify, amend, waive, execute, acknowledge or take any other action
with
respect to any loan agreement, commitment, deed of trust, mortgage,
security
agreement or other loan document in respect of any assets of the
Company;
(ix) to pay, collect, compromise, litigate,
arbitrate or
otherwise
adjust or settle any and all other claims or demands of or against the
Company
or to hold such proceeds against the payment of contingent liabilities;
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(x) to make, execute, acknowledge, endorse and
file any and
all
agreements, documents, instruments, checks, drafts or other evidences of
indebtedness
necessary, convenient, desirable or incidental to the
accomplishment
of the business purposes of the Company;
(xi) to cease the Company's activities and
dissolve and wind
up
its affairs upon its duly authorized dissolution; and
(xii) to cause any special purpose subsidiary
limited liability
company
wholly owned by the Company to do any of the foregoing.
(c) AGENCY AUTHORITY OF THE
MANAGERS; DELEGATION BY THE MANAGERS.
Any
one Manager shall be authorized to endorse all checks, drafts and other
evidences
of indebtedness made payable to the order of the Company and, once
approved
as required under Section 5.1(g) or as specifically required elsewhere
in
this Agreement, to execute all agreements, contracts, commitments, checks,
instruments
and other documents on behalf of the Company. The Managers may also
delegate
any or all of their authority, rights and/or obligations, whether
arising
hereunder, under the Act or otherwise, to any one or more officers,
agents
or other duly authorized representatives of the Company.
(d) DISCRETION OF THE MANAGERS. In
making any and all decisions
relating
to the conduct of the Company's business or otherwise delegated to them
by
any provision of this Agreement, the Managers shall be free to exercise their
sole,
absolute and unfettered discretion so long as such decision was made by
the
Managers in good faith for a purpose reasonably believed by them to be in,
or
not opposed to, the best interests of the Company. The Managers shall not, in
respect
of any such decision, be liable to the Company, the Members or any of
their
respective Affiliates or constituent owners for any resulting actual or
alleged
losses, damages, costs or expenses suffered by them so long as such
decision
was made by the Managers in good faith for a purpose reasonably
believed
by them to be in, or not opposed to, the best interests of the Company.
(e) PERFORMANCE OF DUTIES;
LIABILITY OF MANAGERS. The Managers shall
perform
their managerial duties in good faith and in a manner they believe to be
in,
or not opposed to, the best interests of the Company. In performing their
duties,
the Managers shall be entitled to rely on information, opinions, reports
or
statements, including financial statements and other financial data, of any
attorney,
independent accountant or other Person as to matters which the
Managers
believe to be within such Person's professional or expert competence
unless
the Managers have actual knowledge concerning the matter in question that
would
cause such reliance to be unwarranted.
(f) DEVOTION OF TIME. The Managers
shall not be obligated to devote
all
of their time or business efforts to the affairs of the Company; however,
they
shall devote such time, effort and skill as they deem appropriate for the
management
and operation of the Company's affairs.
(g) DECISIONS OF THE MANAGERS.
Except to the extent that this
Agreement
expressly requires the unanimous approval of all of the Managers, any
decision
or action taken
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by
a majority in number of the Managers (whether verbally or in writing,
whether
in person or by proxy and whether or not at a formal meeting called
pursuant
to Section 5.1(h) shall constitute the act or decision of the
Managers.
(h) MEETINGS OF MANAGERS. Meetings
of the Managers may be called by
any
Manager or by the Chairperson, President, any Senior Vice-President or
Vice-President
or the Secretary of the Company, if any. All meetings shall be
held
upon four (4) days' notice by mail or forty-eight (48) hours' notice
delivered
personally or by telephone, telegraph or facsimile. A notice need not
specify
the purpose of any meeting. Notice of a meeting need not be given to any
Manager
who signs a waiver of notice, a consent to holding the meeting or an
approval
of the minutes thereof, whether before or after the meeting, or who
attends
the meeting without protesting the lack of notice prior to the
commencement
of the meeting. All such waivers, consents and approvals shall be
filed
with the Company records or made a part of the minutes of the meeting. A
majority
of the authorized number of Managers shall constitute a quorum of the
Managers
for the transaction of business, and except to the extent that this
Agreement
expressly requires the approval of all of the Managers, every act or
decision
done or made by a majority in number of the Managers present at a
meeting
duly held at which a quorum is present shall be the act of the Managers.
A
meeting at which a quorum is initially present may continue to transact
business
notwithstanding the withdrawal of Managers if any action taken is
approved
by at least a majority of the required quorum for the meeting. Managers
may
participate in any meeting of the Managers by means of conference telephones
or
similar communications equipment so long as all Managers participating can
hear
one another. A Manager so participating is deemed to be present at the
meeting.
The provisions of this Section 5.1(h)
govern meetings of the Managers if
the
Managers elect, in their discretion, to hold meetings. However, nothing in
this
Section 5.1(h) or in this Agreement is intended to require that meetings of
the
Managers be held, it being the intent of the Members that meetings of the
Managers
are not required.
5.2 ELECTION OF MANAGERS.
(a) NUMBER AND TERM. The Company
shall have one (1), or such other
number
as Onlinefilmsales shall designate from time to time, Manager, who shall
be
designated by Onlinefilmsales. The initial Manager shall be Onlinefilmsales.
Onlinefilmsales
shall have the right to change the identity and number of the
Manager(s)
appointed by it at any time and for any reason, by written notice to
the
other Member, and each Manager so appointed shall serve in that capacity
until
he or she resigns or is removed by Onlinefilmsales, in its absolute
discretion.
(b) VACANCIES. Any vacancy
occurring for any reason in the number of
Managers
may be filled by designation of Onlinefilmsales.
5.3 LIMITATIONS ON POWER OF THE
MANAGERS. The limitations on the
Managers'
power in this Section 5.3 shall apply:
(a) the sale, exchange or other
disposition of all, or substantially
all,
of the Company's assets occurring as part of a single transaction or plan,
or
in a series of transactions,
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shall
require not only the approval of the Managers, but also the affirmative
vote
or written consent of Members holding at least seventy-five percent
(75%)
of all Voting Interests;
(b) the merger of the Company with
another limited liability company
or
a corporation, general partnership or limited partnership shall require not
only
the approval of the Managers, but also the affirmative vote or written
consent
of Members holding at least seventy-five percent (75%) of all Voting
Interests;
provided, however, that in no event shall a Member be required to
become
a general partner in a merger with a general or limited partnership
without
that Member's express written consent or unless the agreement of merger
provides
each Member with the dissenter's rights described in the Act;
(c) any decision to admit a Person
as a Member of the Company shall
require
not only the approval of the Managers, but also the affirmative vote or
written
consent of all of the Members;
(d) any decision to compromise the
obligation of a Member to a make
a
Capital Contribution or to return money or property paid or distributed in
violation
of the Act shall require not only the approval of the Managers, but
also
the affirmative vote or written consent of Members holding at least
seventy-five
percent (75%) of the Voting Interests of all non-interested
Members;
(e) any act which would make it
impossible to carry on the ordinary
business
of the Company shall require not only approval of the Managers, but
also
the affirmative vote or written consent of Members holding at least
seventy-five
percent (75%) of all Voting Interests;
(f) any decision to place the
Company into Bankruptcy shall require
not
only the approval of the Managers, but also the affirmative vote or written
consent
of Members holding at least seventy-five percent (75%) of all Voting
Interests;
and
(g) any amendment to the
Certificate of Formation or this Agreement
shall
require not only the approval of the Managers, but also the affirmative
vote
or written consent of Members holding at least seventy-five percent (75%)
of
all Voting Interests, provided, however, that there shall be no change in the
purpose
of the Company and provided further that no amendment will be binding on
a
Member that diminishes its rights or increases its obligations unless approved
by
such Member.
5.4 MEMBERS HAVE NO MANAGERIAL
AUTHORITY. The Members shall have no power
to
participate in the management of the Company except as expressly authorized
by
this Agreement and except as expressly required by any non-waivable provision
of
the Act. Without the written authorization of the Managers to do so, no
Member
shall have any power or authority to bind or act on behalf of the Company
in
any way, to pledge its assets or to render it liable for any purpose.
5.5 TRANSACTIONS BETWEEN THE COMPANY AND
THE MANAGERS, THE MEMBERS OR
THEIR
AFFILIATES.
(a) CONTRACTS WITH AFFILIATES.
Notwithstanding that it may
constitute
a conflict of interest, the Members who are not also Managers may,
and
may cause their Affiliates to,
14
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engage
in any transaction (including, without limitation, the purchase, sale,
lease
or exchange of any property, the lending of money, the rendering of any
service
or the establishment of any salary, other compensation or other terms
of
employment) with the Company so long as that transaction is not expressly
prohibited
by this Agreement, the transaction is approved by the Managers and
the
transaction is fair to the Company and is on commercially reasonable
terms.
(b) CONTRACTS WITH MANAGERS OR
AFFILIATES OF THE MANAGERS. The
Members
acknowledge and intend that the Managers may provide, or cause the
Company
to engage one or more of its Affiliates to provide, any or all goods
and/or
services required by the Company in the conduct of its business and may
engage
in any transaction (including, without limitation, the purchase, sale,
lease
or exchange of any property, the lending of money, the rendering of any
service
or the establishment of any salary, other compensation or other terms of
employment)
with the Company, and that, except only as expressly limited below,
the
terms and conditions of any such engagement shall be determined exclusively
by
the Managers in their sole and absolute discretion; provided, however, that
notwithstanding
anything to the contrary set forth in this Agreement, all
disinterested
Members must approve the terms and conditions of any engagement by
the
Managers of one or more of the Managers' Affiliates prior to the Company
entering
into such engagement, which approval shall not be unreasonably
withheld.
(c) TREATMENT OF AFFILIATE LOANS AND
FEES. To the fullest extent
permitted
by law, all principal, interest, costs and expenses owing by the
Company
to the Members, the Managers and/or Affiliates thereof in repayment of
loans
and all fees, commissions and/or reimbursable amounts payable by the
Company
to the Members, the Managers and/or Affiliates thereof shall be treated
in
the same manner as liabilities payable to unaffiliated creditors of the
Company
and shall be paid and taken into account, as such, before any
Distributions
of Distributable Cash are made to the Economic Interest Holders.
5.6 OFFICERS.
(a) APPOINTMENT OF OFFICERS. The
Managers may, at their discretion,
appoint
officers of the Company at any time. The officers of the Company may
include
a Chairperson, a President or Chief Executive Officer, one or more
Senior
Vice Presidents, one or more Vice Presidents, a Secretary, Assistant
Secretaries,
a Chief Financial Officer, a Treasurer and one or more Assistant
Treasurers
and a Comptroller. The officers shall serve at the pleasure of the
Managers,
subject to all rights, if any, of an officer under any contract of
employment.
Any individual may hold any number of offices. Officers of the
Managers
may serve as officers of the Company if appointed by the Managers. The
officers
shall exercise such powers and perform such duties as are typically
exercised
by similarly titled officers in a corporation and as shall be
determined
from time to time by the Managers. If any such officer is entitled to
a
salary for his or her services, however, all of that salary shall be paid by
the
Company.
(b) SIGNING AUTHORITY OF OFFICERS.
The officers, if any, shall have
such
authority to sign checks, instruments and other documents on behalf of the
Company
as may be delegated to them by the Managers in writing.
(c) ACTS OF OFFICERS AS CONCLUSIVE
EVIDENCE OF AUTHORITY. Any note,
mortgage,
deed of trust, evidence of indebtedness, contract, certificate,
statement,
conveyance or
15
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other
instrument or obligation in writing, and any assignment or endorsement
thereof,
executed or entered into between the Company and any other Person,
when
signed by the Chairperson, the President or Chief Executive Officer, any
Senior
Vice-President and any Secretary, any Assistant Secretary, any
Treasurer,
or any Assistant Treasurer of the Company, is not invalidated as
to
the Company by any lack of authority of the signing officers in the
absence
of actual knowledge on the part of the other Person that the signing
officer(s)
had no authority to execute the same.
5.7 COMPETING ACTIVITIES. The Manager,
the Members and the Economic
Interest
Holders, and their respective officers, directors, shareholders,
partners,
members, managers, agents, employees and Affiliates, may engage or
invest
in, independently or with others, any business activity of any type or
description,
including without limitation, those that might be the same as or
similar
to the Company's business and that might be in direct or indirect
competition
with the Company. None of the Company, the Manager, or any other
Member
or Economic Interest Holder shall have the right in or to such other
business
activities or to the income or proceeds derived therefrom. None of the
Manager
or the Members or Economic Interest Holders shall be obligated to
present
any investment opportunity or prospective economic advantage to the
Company
or the Manager, other Members or Economic Interest Holders even if the
opportunity
is one of the character that, if presented to the Company or the
Manager,
other Members or Economic Interest Holders, could be taken by the
Company
or any of the Manager, other Members or Economic Interest Holders. The
Manager,
the Members and the Economic Interest Holders shall have the right to
hold
any investment opportunity or prospective economic advantage for their own
account
or to recommend such opportunity to Persons other than the Company or
the
Manager, other Members or Economic Interest Holders. The Members and
Economic
Interest Holders acknowledge that the Manager and the other Members or
Economic
Interest Holders and their Affiliates own and/or manage other
businesses,
including businesses that may compete with the Company and for the
Manager's
and Members' time. The Members and Economic Interest Holders hereby
waive
any and all rights and claims which they may otherwise have against the
Manager
and the other Members and Economic Interest Holders and their respective
officers,
directors, shareholders, partners, members, managers, agents,
employees
and Affiliates as a result of any such activities. Notwithstanding the
foregoing,
the provisions of this Section 5.7 shall be subject to the terms of
the
MediaChase Consulting Agreement (a "Related Party Agreement"), and in
the
event
of any conflict, the terms and provisions of such separate agreement shall
control.
5.8 PAYMENTS TO MANAGERS AND OTHERS. The
Company is authorized to pay any
Person
remuneration or reimbursement for goods and services provided to the
Company.
Without limiting the generality of the foregoing, the Company shall pay
the
Members, the Economic Interest Holders and their Affiliates for services
rendered
or goods provided by them to the Company to the extent that those
Members,
Economic Interest Holders or Affiliates are not required to render such
services
or goods themselves without charge to the Company, and to the extent
that
the fees paid to those Members, Economic Interest Holders or Affiliates do
not
exceed the fees that would be payable to independent responsible third
parties
that are willing to perform those services or provide those goods.
5.9 EXPENSES. The Company shall
reimburse the Managers and their
Affiliates
for all reasonable out-of-pocket costs and expenses incurred by them
in
connection with the business and affairs of the Company, as well as
organizational
expenses (including, without limitation,
16
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legal
and accounting fees and costs) incurred by them to form the Company and
prepare
the Certificate of Formation (other than expenses incurred in
connection
with the preparation and negotiation of this Agreement), subject
to
the Managers receiving advance approval from all non-Manager Members in
the
case of expenses (or a series of related expenses) in excess of an amount
to
be agreed upon by all the Members in any month. The Managers may allocate
to
the Company, on any basis selected by them in good faith which is
consistent
with good accounting practice, a portion of any and all expenses,
including
general, special and administrative expenses, incurred by them or
their
Affiliates for the benefit of the Company, subject to the Managers
receiving
advance approval from all non-Manager Members in the case of an
allocation
to the Company (or a series of related allocations) in excess of
an
amount to be agreed upon by all the Members in any month.
ARTICLE VI
ALLOCATIONS OF NET PROFITS, NET LOSSES AND
DISTRIBUTIONS
6.1 MINIMUM GAIN CHARGEBACK. In the
event that there is a net decrease in
the
Company Minimum Gain during any taxable year, the minimum gain chargeback
described
in Sections 1.704-2(f) and (g) of the Treasury Regulations shall
apply.
6.2 MEMBER MINIMUM GAIN CHARGEBACK. If
during any taxable year there is a
net
decrease in Member Minimum Gain, the partner minimum gain chargeback
described
in Section 1.704-2(i)(5) of the Treasury Regulations shall apply.
6.3 QUALIFIED INCOME OFFSET. Any
Economic Interest Holder who
unexpectedly
receives an adjustment, allocation or Distribution described in
subparagraphs
(4), (5) or (6) of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations,
which adjustment, allocation or distribution creates or increases a
deficit
balance in that Economic Interest Holder's Capital Account, shall be
allocated
items of "book" income and gain in accordance with the provisions of
the
"qualified income offset" as described in Section
1.704-1(b)(2)(ii)(d) of
the
Treasury Regulations.
6.4 NONRECOURSE DEDUCTIONS. Nonrecourse
Deductions shall be allocated to
the
Economic Interest Holders in proportion to their Economic Interests.
6.5 MEMBER NONRECOURSE DEDUCTIONS.
Member Nonrecourse Deductions shall be
allocated
to the Economic Interest Holders as required in Section 1.704-2(i)(1)
of
the Treasury Regulations in accordance with the manner in which the Economic
Interest
Holders bear the burden of an Economic Risk of Loss corresponding to
the
Member Nonrecourse Deductions.
6.6 ALLOCATION OF NET PROFITS. The Net
Profits for each fiscal period of
the
Company shall be allocated to the Economic Interest Holders in accordance
with
the following order of priority:
(a) first, to those Economic
Interest Holders with negative Adjusted
Capital
Accounts, among them in proportion to the ratio of the negative balances
in
their Adjusted Capital Accounts, until no Economic Interest Holder has a
negative
Adjusted Capital Account;
17
<PAGE>
(b) second, to those Economic
Interest Holders whose Adjusted
Capital
Contributions are in excess of their Adjusted Capital Accounts, among
them
in accordance with the ratio of these excesses, until all of these excesses
have
been eliminated;
(c) third, to each Member in
proportion to each Member's Preferred
Return
Account, until the Preferred Return Account of each is reduced to zero;
and
(d) finally, to the Economic
Interest Holders in proportion to their
Economic
Interests.
6.7 ALLOCATION OF NET LOSSES. Net Losses
for each fiscal period of the
Company
shall be allocated to the Economic Interest Holders in accordance with
the
following order of priority:
(a) first, to those Economic
Interest Holders with positive Adjusted
Capital
Accounts, in proportion to the ratio of the positive balances in their
Adjusted
Capital Accounts, until no Economic Interest Holder has a positive
Adjusted
Capital Account; and
(b) finally, to the Economic
Interest Holders in proportion to their
Economic
Interests.
6.8 DISTRIBUTIONS BY THE COMPANY.
Subject to applicable law and any
limitations
contained elsewhere in this Agreement, the Managers may elect from
time
to time to cause the Company to distribute Distributable Cash to the
Economic
Interest Holders, which Distributions shall be in the following order
of
priority:
(a) first, to each Member in
proportion to each Member's Unpaid
Preferred
Return, until the Unpaid Preferred Return of each has been reduced to
zero;
(b) second, to each Member in
proportion to each Member's Adjusted
Capital
Contributions, until the Adjusted Capital Contributions of each are
reduced
to zero; and
(c) finally, to the Economic
Interest Holders in proportion to their
Economic
Interests.
6.9 ALLOCATION OF NET PROFITS AND LOSSES
AND DISTRIBUTIONS IN RESPECT OF
A
TRANSFERRED INTEREST. If any Economic Interest is Transferred or is increased
or
decreased by reason of the admission of a new Economic Interest Holder or
otherwise
during any Fiscal Year, each item of income, gain, loss, deduction or
credit
of the Company for that Fiscal Year shall be allocated based on the
"interim
closing of the books" method.
6.10 TAX ALLOCATION MATTERS.
(a) CONTRIBUTED OR REVALUED
PROPERTY. Each Economic Interest
Holder's
allocable share of the taxable income or loss of the Company,
depreciation,
depletion, amortization and gain or loss with respect to any
contributed
property, or with respect to revalued property where the Company's
property
is revalued pursuant to Paragraph (b)(2)(iv)(f) of Section 1.704-1 of
the
Treasury Regulations, shall be determined in the manner (and as to
revaluations,
in the same manner as) provided in Section 704(c) of the Code. The
allocation
shall
18
<PAGE>
take
into account, to the full extent required or permitted by the Code, the
difference
between the adjusted basis of the property to the Economic
Interest
Holder contributing it and the fair market value of the property
determined
by the Managers at the time of its contribution or revaluation, as
the
case may be. The Company shall apply Section 704(c)(1)(A) by using the
"traditional
method" as set forth in Section 1.704-3(b) of the Treasury
Regulations.
(b) RECAPTURE ITEMS. In the event
that the Company has taxable
income
that is characterized as ordinary income under the recapture provisions
of
the Code, each Economic Interest Holder's distributive share of taxable gain
or
loss from the sale of Company assets (to the extent possible) shall include a
proportionate
share of this recapture income equal to that Economic Interest
Holder's
share of prior cumulative depreciation deductions with respect to the
assets
which gave rise to the recapture income.
6.11 ORDER OF APPLICATION. To the extent
that any allocation,
Distribution
or adjustment specified in any of the preceding Sections of this
Article
VI affects the results of any other allocation, Distribution or
adjustment
required herein, the allocations, Distributions and adjustments
specified
in the following Sections shall be made in the priority listed:
(a) Section 6.8.
(b) Section 6.1.
(c) Section 6.2.
(d) Section 6.3.
(e) Section 6.4.
(f) Section 6.5.
(g) Section 6.7.
(h) Section 6.6.
(i) Section 10.4.
These provisions shall be applied as if
all Distributions and
allocations
were made at the end of the Company's Fiscal Year. Where any
provision
depends on the Capital Account of any Economic Interest Holder, that
Capital
Account shall be determined after the operation of all preceding
provisions
for the Fiscal Year.
6.12 ALLOCATION OF LIABILITIES. Each
Economic Interest Holder's interest
in
"partnership" profits for purposes of determining that Member's share
of
"excess
nonrecourse liabilities" of the Company as used in Section 1.752-3(a)(3)
of
the Treasury Regulations, shall be equal to that Economic Interest Holder's
Economic
Interest.
6.13 FORM OF DISTRIBUTION. No Economic
Interest Holder, regardless of the
nature
of its Capital Contribution, has the right to demand and receive any
Distribution
from the Company
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<PAGE>
in
any form other than money. No Economic Interest Holder may be compelled to
accept
from the Company a Distribution of any asset in kind in lieu of a
proportionate
Distribution of money being made to other Economic Interest
Holder(s),
and except upon a dissolution and the winding up of the Company,
no
Economic Interest Holder may be compelled to accept a Distribution of any
asset
in kind.
ARTICLE VII
TRANSFER OF
INTERESTS
7.1 TRANSFER OF INTERESTS.
Notwithstanding anything to the contrary set
forth
elsewhere herein, no Member may, except as permitted in Section 7.3,
Transfer
all or any part of its Membership Interest or its Economic Interest,
for
any reason, within the one (1) year period (the "Prohibited Transfer
Period")
commencing upon the date hereof. Any attempted Transfer during such
Prohibited
Transfer Period shall be null and void ab initio, and the transferee
shall
not become either a Member or an Economic Interest Holder. After the
Prohibited
Transfer Period, any Member may Transfer all or any part of its
Membership
Interest or Economic Interest provided it has complied with Section
7.3.
After the consummation of any permitted Transfer of all or any part of a
Membership
Interest or an Economic Interest, the Membership Interest or Economic
Interest
so Transferred shall continue to be subject to the terms and provisions
of
this Agreement, and any further Transfers shall be required to comply with
the
terms and provisions of this Agreement.
7.2 [intentionally omitted]
7.3 RIGHT OF FIRST REFUSAL. At any time
after the Prohibited Transfer
Period,
if any Member decides to Transfer all or any part of its Membership
Interest
or Economic Interest (the "Offered Interest") pursuant to a Bona Fide
Offer,
that Member shall give written notice to the Company and to all other
Members
(the "Eligible Members"), setting forth in full the terms of such
Bona
Fide
Offer and the identity of the offeror(s). The Company shall then have the
right
and option, for a period ending thirty (30) calendar days following its
receipt
of the written notice, to elect to purchase all or any part of the
Offered
Interest at the purchase price and upon the terms specified in the Bona
Fide
Offer, and the Eligible Members (pro rata in accordance with the ratio of
their
Economic Interests) shall then have the right and option, for a period of
twenty
(20) days thereafter, to elect to purchase all or any part of the Offered
Interest
not elected to be purchased by the Company at the purchase price and
upon
the terms specified in the Bona Fide Offer. If all Eligible Members do not
elect
to purchase the entire balance of the Offered Interest, then the Eligible
Members
electing to purchase shall have the right and option, for a period of
ten
(10) days thereafter and pro rata in accordance with the ratio of their
Economic
Interests, to elect to purchase the balance of the Offered Interest
available
for purchase.
Notwithstanding the foregoing, however,
if the Company and/or the
Eligible
Members do not elect to purchase all of the Offered Interest subject to
the
right of first refusal pursuant to this Section 7.3, the Member desiring to
Transfer
may Transfer all of the Offered Interest to the original proposed
transferee
upon the terms set forth in the written notice provided to the
Company,
whereupon the original proposed transferee shall take and hold the
Offered
Interest subject to this Agreement and to all of the obligations and
restrictions
upon the Member from
20
<PAGE>
whom
such Offered Interest was acquired and shall observe and comply with
this
Agreement and with all such obligations and restrictions. Any such
Transfer
of the Offered Interest to the original proposed transferee must be
effected
within ninety (90) calendar days after the date of the termination
of
the right of first refusal options provided above. If no such Transfer is
effected
within such ninety (90) calendar day period, then any subsequent
proposed
Transfer of all or any part of the Membership Interest or Economic
Interest
of the Member desiring to Transfer shall once again be subject to
the
provisions of this Section 7.3.
For these purposes, if any consideration
offered for the Offered Interest
in
the Bona Fide Offer consists of rights, interests or property other than
money
or an obligation to pay money, the Managers shall, in good faith,
determine
the Fair Market Value of that consideration in monetary terms as of
the
date the Bona Fide Offer was received by the Member desiring to Transfer.
The
Fair Market Value of that consideration in monetary terms, as so determined,
shall
be included in the purchase price payable by the Company and/or the
purchasing
Members hereunder, but, in order to exercise their rights of first
refusal
granted above, neither the Company nor the purchasing Members need
transfer
to the Member desiring to Transfer the actual rights, interests or
property
offered in the Bona Fide Offer nor afford the Member desiring to
Transfer
the same tax treatment which would have been available to it under the
Bona
Fide Offer.
7.4 [intentionally omitted]
7.5 [intentionally omitted]
7.6 [intentionally omitted]
7.7 REPURCHASE RESTRICTIONS IMPOSED BY
LAW. Notwithstanding anything to
the
contrary stated herein, the Company's right to exercise any option provided
in
this Article VII shall be subject to the restrictions governing prohibited
Company
Distributions set forth in the Act and such other pertinent federal and
state
laws, rules, regulations or other governmental restrictions as may now or
hereafter
be in effect.
7.8 FURTHER RESTRICTIONS ON TRANSFER OF
INTERESTS. In addition to any
other
restrictions found in this Agreement, no Interest Holder may Transfer its
Membership
Interest, its Economic Interest or any part thereof (a) without
compliance
with the Securities Act, the California Corporate Securities Law of
1968
and any other applicable securities laws, and (b) if the Transfer could
result
in the Company not being classified as a partnership for federal or state
income
tax purposes, in each case as determined by the Managers. Any attempted
or
purported Transfer in violation of this Section 7.8 shall be null and void ab
initio,
and the transferee shall not become either a Member or an Economic
Interest
Holder.
7.9 SUBSTITUTION OF MEMBERS.
Notwithstanding anything in this Agreement
to
the contrary, no transferee of the whole or any part of a Membership Interest
shall
become a substituted Member in the place of its transferor unless all of
the
following conditions are satisfied:
(a) the Transferring Interest
Holder and the transferee execute and
acknowledge
such other instrument or instruments as the Managers may deem
necessary
or desirable to effectuate the admission, including the written
acceptance
and adoption by the
21
<PAGE>
transferee
of all of the terms and conditions of this Agreement as the same
may
have been amended; and
(b) The transferee pays to the
Company a transfer fee which is
sufficient,
in the reasonable discretion of the Managers, to cover all expenses
incurred
by the Company in connection with the Transfer and substitution.
7.10 ENFORCEMENT. The Transfer restrictions
contained in this Agreement
are
of the essence of the ownership of a Membership Interest or an Economic
Interest.
Upon application to any court of competent jurisdiction, the Company
shall
be entitled to a decree against any Person violating or about to violate
such
restrictions, requiring their specific performance, including those
requiring
a Member or an Economic Interest Holder to sell all or part of its
Membership
Interest or Economic Interest to the Company and/or the other
Members,
or prohibiting a Transfer of all or part of a Membership Interest or an
Economic
Interest.
7.11 EFFECT OF TRANSFERS IN VIOLATION OF
AGREEMENT. If, for any reason, a
court
refuses to enforce the provisions of Section 7.1 to the effect that a
Transfer
in violation of this Article VII is null and void, then, upon any such
Transfer
of a Membership Interest or part thereof in violation of this Article
VII,
the transferee shall have no right to vote or participate in the management
of
the business, property and affairs of the Company or to exercise any rights
of
a Member. The transferee shall only be entitled to become an Economic
Interest
Holder to the extent of the Membership Interest attempted or purported
to
be Transferred to it in violation of this Agreement and thereafter shall only
receive
the share of the Company's Net Profits, Net Losses, Tax Credits,
Distributable
Cash, and other Distributions to which the Transferring Interest
Holder
would otherwise have been entitled.
ARTICLE VIII
CONSEQUENCES OF MEMBERSHIP
TERMINATION EVENTS
8.1 DISSOLUTION OF COMPANY. The
occurrence of a Membership Termination
Event
as to any Member other than the last and only remaining Member shall not
dissolve
the Company. Upon the occurrence of a Membership Termination Event as
to
the last and only remaining Member, the Company shall dissolve unless the
Managers
and the successor-in-interest of the last and only remaining Member
consent
in writing within ninety (90) days of such Membership Termination Event
to
the continuation of the Company and to the admission of such personal
representative
or other successor-in-interest, or its designee or nominee, as a
Member.
8.2 ADMISSION OR CONVERSION. Upon the
occurrence of a Membership
Termination
Event with respect to a Member under circumstances where the Company
does
not dissolve, the Managers shall determine which one of the following shall
occur
and give written notice thereof to the remaining Members and to the Member
who
suffered the Membership Termination Event (the "Former Member"):
(a) the Former Member's
successor-in-interest shall be admitted as a
Member
of the Company in the place and stead of the Former Member to the extent
of
the Former Member's Membership Interest (the "Former Member's
Interest");
provided,
however, that the
22
<PAGE>
Managers
may not elect this alternative without the affirmative vote or
written
consent of Members constituting a Majority in Interest of all
remaining
Members holding at least seventy-five percent (75%) of the Voting
Interests
of all remaining Members;
(b) the Former Member's Interest
shall be converted to a bare
Economic
Interest, and the Former Member's successor-in-interest shall become
the
owner of that Economic Interest; or
(c) the Company, and/or one or more
of the remaining Members and/or
any
other Person(s) designated by the Managers shall purchase, and the Former
Member
or the Former Member's successor-in-interest shall sell, the Former
Member's
Interest upon the terms and conditions specified in Section 8.3.
8.3 TERMS OF TRANSFER.
(a) TRANSFEREE BOUND BY AGREEMENT.
If all or any part of Member's
Membership
Interest or Economic Interest has been Transferred to a transferee,
that
transferee shall take and hold such Interest subject to this Agreement and
to
all of the obligations and restrictions upon the Member and shall observe and
comply
with this Agreement and with all such obligations and restrictions.
(b) NOTICE OF REPURCHASE EVENT.
Upon the occurrence of a Membership
Termination
Event, the Member affected (the "Transferring Interest Holder")
shall
promptly give notice (the "Notice") to the Company and to all
Eligible
Members,
stating when the Membership Termination Event occurred, the reason
therefor,
if applicable, the percentage of the Membership Interest or Economic
Interest
so affected, and the name, address and capacity of the transferee, if a
Transfer
has occurred. If no such Notice is given within ten (10) days of the
occurrence
of the Membership Termination Event, any Eligible Member may
institute
the purchase proceedings by giving a Notice to the Company, the other
Eligible
Members and the Transferring Interest Holder. For purposes of the
remainder
of this Section 8.3, the term "Affected Interest" shall mean the
Membership
Interest or Economic Interest which the Transferring Interest Holder
is
required to sell to the Company and the Eligible Members pursuant to Section
8.2(c)
above.
(c) OPTION TO PURCHASE. Upon
receipt of any Notice, the Company
shall
have the right and option, for a period ending thirty (30) calendar days
following
the determination of the purchase price of the Affected Interest, to
elect
to purchase all (but not less than all) of the Affected Interest at the
price
and upon the terms provided below in this Section 8.3, and the Eligible
Members,
pro rata in accordance with the ratio of their Economic Interests,
shall
then have the right and option, for a period of twenty (20) days
thereafter,
to elect to purchase all or any part of the Affected Interest not
elected
to be purchased by the Company upon the same terms and conditions as
exist
in favor of the Company. If all Eligible Members do not elect to purchase
the
entire balance of the Affected Interest, then the Eligible Members electing
to
purchase shall have the right and option, for a period of ten (10) days
thereafter
and pro rata in accordance with the ratio of their Economic
Interests,
to purchase the balance of the Affected Interest available for
purchase.
If the Company and the Eligible Members do not elect to purchase all
of
the Affected Interest, the Transferring Interest Holder shall retain all of
the
Affected Interest subject to all of the terms of this Agreement.
23
<PAGE>
(d) PURCHASE PRICE.
(i) BY AGREEMENT. Upon the Company's receipt of
the Notice,
the
Transferring Interest Holder and the Company (acting through the Managers)
shall
promptly attempt to agree upon a purchase price for the Affected Interest.
(ii) BY APPRAISAL IF NO AGREEMENT. If the Company
and the
Transferring
Interest Holder are unable to agree upon a purchase price within
thirty
(30) calendar days following the Company's receipt of the Notice, they
shall
appoint an appraiser as mutually agreed by the parties to value the Fair
Market
Value of the Affected Interest as of the date the Membership Termination
Event
occurred. The determination of the purchase price in the by the appraiser
shall
be conclusive for all purposes and upon all parties.
The expenses of appraisal shall be borne
equally by the Company and
the
Transferring Interest Holder. The portion of the compensation and fees
allocated
to the Company shall be apportioned, as among the Company and any
Members
electing to purchase the Affected Interest, on a pro rata basis to the
amount
of the Affected Interest purchased by the Company and each such Member,
respectively.
(iii) QUALIFICATIONS OF APPRAISER. The appraiser
selected by
the
parties shall be reasonably experienced in valuing interests in businesses
similar
to the business then conducted by the Company.
(e) PAYMENT OF PURCHASE PRICE.
(i) PAYMENT. Except as provided below, the
purchase price for
the
Affected Interest shall be payable at the option of the Company and each
purchasing
Member, severally, either entirely in cash, or partly in cash and
partly
by delivery of a promissory note (in which latter case, at least
twenty-five
percent (25%) of the purchase price for the Affected Interest shall
be
payable in cash at closing with the remainder payable by delivery of a
promissory
note). Each promissory note hereunder ("Note") shall be in the form
of
a secured promissory note, payable as provided in clause (ii) below.
(ii) PROMISSORY NOTES. Each Note shall be payable
in four(4)
equal
quarterly principal installments over one year, with fixed interest at
Prime.
Interest shall be paid quarterly in addition to principal. Each Note
shall
provide that the maker of the Note shall have the right to prepay all or
any
part of the principal balance on the Note without penalty or premium and
that
any sums paid in any period in excess of the regular installment for that
period
shall be applied against installments thereafter falling due, in the
inverse
order of their maturity or against all of the remaining installments
equally,
at the option of the holder of the Note. Each Note shall also provide
that
in case of default in the payment of any installment when due, the entire
principal
balance then remaining unpaid shall become immediately due and payable
at
the option of the holder, and shall provide for the payment by the maker of
reasonable
attorneys' fees to the holder in the event suit is commenced because
of
any default. Each Note executed by a Member shall be secured by a security
interest
in that part of the Affected Interest purchased by that Member. Each
Note
executed by the Company shall be secured by a security interest in all of
the
property of the Company. So long as no default occurs in the making of
payments
on any
24
<PAGE>
Note,
the Company and/or the purchasing Members shall have the right to
receive
all distributions of Distributable Cash and other Distributions and
all
allocations of Net Profits, Net Losses and Tax Credits attributable
thereto.
However, upon default by the Company or a purchasing Member in the
payment
of its Note, and if that default continues for a period of thirty
(30)
days after notice thereof to the Company and/or the purchasing Member,
the
Transferring Interest Holder shall thereupon have, in addition to any
other
rights or remedies it may have by reason of the default, the right to
receive
the distributions of Distributable Cash and other Distributions
attributable
thereto (but not the allocations of Net Profits, Net Losses and
Tax
Credits attributable thereto, which shall continue to vest until
foreclosure
in the legal owners of the Membership Interests or Economic
Interest(s)
so serving as security). Any Distributions so received shall be
applied
to, and shall reduce, the amount of principal and interest owing on
the
Note.
(iii) SUBORDINATION OF NOTES. Each Note issued by
the Company
shall
be subordinated in right of payment to the payment of all Senior Debt (as
defined
below) upon such terms and conditions as the holders of the Senior Debt
may
determine, and each such Note shall contain subordination provisions which
are
approved as to form and substance by all holders of the Senior Debt. For
these
purposes "Senior Debt" means financing provided by one or more
institutional
or private lenders to fund the Company's business operations. The
parties
acknowledge that the Company's ability to make payments under
outstanding
Notes may be limited from time to time by any such subordination
provisions,
by provisions of applicable law and by provisions of the Articles.
If,
as a result of these limitations, the Company is at any particular time able
to
make payments under some but not all of its outstanding Notes, it shall
allocate
the payments which it is able to make among the Notes on a strict
"first
issued, first paid" basis. Each Note issued by the Company shall provide
that
no payments of principal or interest may be made thereon at any time that
the
Company is in arrears in the payment of principal or interest on any Note
previously
issued by the Company.
(f) CONSUMMATION OF SALE. Unless
the parties involved mutually agree
otherwise,
delivery to the Company and/or the purchasing Members of the Affected
Interest
to be sold hereunder and payment of the purchase price therefor shall
take
place at a closing (the "Closing") to be held at the principal office
of
the
Company within thirty (30) calendar days following the termination of the
last
applicable option period. At the Closing, the Transferring Interest Holder
shall
deliver to the Company and/or the purchasing Members a bill of sale and
assignment
effecting the transfer of the Affected Interest to be sold, in form
and
substance satisfactory to the Company and/or the purchasing Members, and
shall
deliver, in addition, any other documents reasonably requested by the
Company
and/or the purchasing Members to effectuate the purposes of this
Agreement.
ARTICLE IX
ACCOUNTING, RECORDS,
REPORTING BY MEMBERS
9.1 BOOKS AND RECORDS. The books and
records of the Company shall be
kept,
and the financial position and the results of its operations recorded, in
accordance
with the method selected by the Managers. The books and records of
the
Company shall reflect all the Company
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transactions
and shall be appropriate and adequate for the Company's
business.
The Company shall maintain all of the following at its principal
office:
(a) a current list of the full name
and last known business or
residence
address of each Member and Economic Interest Holder set forth in
alphabetical
order, together with the Capital Contributions, Capital Account,
Voting
Interest and Economic Interest of each Member and Economic Interest
Holder;
(b) a current list of the full name
and business or residence
address
of each Manager;
(c) copies of the Certificate of
Formation and all amendments
thereto,
together with executed copies of any powers of attorney pursuant to
which
the Certificate of Formation or any amendments thereto have been executed;
(d) copies of the Company's
federal, state and local income tax or
information
returns and reports, if any, for the six most recent taxable years;
(e) copies of this Agreement and
any and all amendments thereto,
together
with executed copies of any powers of attorney pursuant to which this
Agreement
or any amendments thereto have been executed;
(f) copies of the financial
statements of the Company, if any, for
the
six most recent Fiscal Years;
(g) the Company's books and records
pertaining to the internal
affairs
of the Company for at least the current and past four Fiscal Years; and
(h) copies of all written consents
approving actions taken by the
Members
without a meeting pursuant to Section 4.4.
9.2 REPORTS; ANNUAL STATEMENTS.
(a) GOVERNMENTAL REPORTS. The
Managers shall cause to be filed all
documents
and reports required to be filed with any governmental agency in
accordance
with the Act.
(b) FINANCIAL REPORTS. The Managers
shall cause to be sent to each
Member
of the Company (a) not later than one hundred twenty (120) days after the
close
of each Fiscal Year of the Company, the Company's unaudited financial
statements
for that Fiscal Year, including a balance sheet as of the end of that
Fiscal
Year and an income statement and statement of changes in financial
position
for that Fiscal Year, accompanied by the report thereon of the
independent
accountants engaged by the Company, and (b) within thirty (30) days
after
the end of each of the first three (3) fiscal quarters of each Fiscal Year
of
the Company, the Company's unaudited financial statements for such fiscal
quarter,
including a balance sheet as of the end of that fiscal quarter and an
income
statement and statement of changes in financial position for such fiscal
quarter.
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(c) TAX REPORTS. The Managers shall
cause to be prepared at least
annually,
at Company expense, information necessary for the preparation of
the
Members' and Economic Interest Holders' federal and state income tax
returns.
The Managers shall send or cause to be sent to each Member and
Economic
Interest Holder within ninety (90) days after the end of each
taxable
year such information as is necessary to complete federal and state
income
tax or information returns.
9.3 BANK ACCOUNTS; INVESTED FUNDS. All
funds of the Company shall be
deposited
in such account or accounts of the Company as may be determined by
the
Managers and shall not be commingled with the funds of any other Person.
All
withdrawals therefrom shall be made upon checks signed by such persons
and
in such manner as the Managers may determine. Temporary surplus funds of
the
Company may be invested in commercial paper, time deposits, short-term
government
obligations or other investments determined by the Managers.
9.4 TAX MATTERS FOR THE COMPANY HANDLED
BY TAX MATTERS PARTNER. The
Managers
shall from time to time cause the Company to make such tax elections
as
they deem to be in the best interests of the Company and the Members. The
Tax
Matters Partner shall represent the Company (at the Company's expense) in
connection
with all administrative and/or judicial proceedings by the
Internal
Revenue Service or any government authority involving any return of
the
Company, and may expend the Company's funds for professional services and
costs
associated therewith. Without limiting the powers which the Tax Matters
Partner
may exercise, the Tax Matters Partner shall have the authority to do
any
of the following: (a) enter into a settlement agreement with the Internal
Revenue
Service which binds the Members, (b) file a petition as contemplated
in
Section 6226(a) or 6228 of the Code, (c) intervene in any action as
contemplated
in Section 6226(b)(5) of the Code, (d) file any request
contemplated
in Section 6227(b) of the Code, or (e) enter into an agreement
extending
the period of limitations as contemplated in Section 6229(b)(1)(B)
of
the Code.
9.5 ACCOUNTING MATTERS. All decisions as
to accounting matters shall
be
made by the Managers.
9.6 CONFIDENTIALITY. All books, records,
financial statements, tax
returns,
budgets, business plans and projections of the Company, all other
Confidential
Information and all of the terms and provisions of this
Agreement
shall be held in confidence by the Managers, the Members and the
Economic
Interest Holders and their respective Affiliates, subject to any
obligation
to comply with (a) any applicable law, (b) any rule or regulation
of
any legal authority or securities exchange, or (c) any subpoena or other
legal
process to make information available to the Persons entitled thereto.
Such
confidentiality shall be maintained to the same degree as each Manager,
Member
or Economic Interest Holder maintains its own confidential information
and
shall be maintained until such time, if any, as any such confidential
information
either is, or becomes, published or a matter of public knowledge.
Without
limiting the generality of the foregoing, no Member, Economic
Interest
Holder or Manager shall, at any time (both during the period such
Person
is a Member, Economic Interest Holder or Manager and thereafter),
cause,
suffer or permit the Confidential Information to be used for the gain
or
benefit of any party outside of the Company or for such Person's personal
gain
or benefit outside the scope of such Person's relationship with the
Company.
27
<PAGE>
ARTICLE X
DISSOLUTION AND WINDING
UP
10.1 DISSOLUTION. The Company shall be
dissolved, its assets disposed
of
and its affairs wound up upon the first to occur of the following:
(a) the vote of the Managers and
Members holding at least
seventy-five
percent (75%) of all Voting Interests;
(b) the occurrence of a Membership
Termination Event as to the
last
and only remaining Member, if the Managers and that Member's
successor-in-interest
fail to consent to the continuation of the Company in
accordance
with Section 8.1 within ninety (90) days after the occurrence of
that
event;
(c) the sale of all or
substantially all of the assets of the
Company;
or
(d) the occurrence of an event
which makes it unlawful for the
business
of the Company to be continued.
10.2 DATE OF DISSOLUTION. Dissolution of
the Company shall be
effective
on the day on which the event occurs giving rise to the
dissolution,
but the Company shall not terminate until the assets of the
Company
have been liquidated and distributed as provided herein.
Notwithstanding
the dissolution of the Company, prior to the termination of
the
Company the business of the Company and the rights and obligations of the
Members
and Economic Interest Holders, as such, shall continue to be governed
by
this Agreement.
10.3 WINDING UP. Upon the occurrence of
any event specified in Section
10.1,
the Company shall continue solely for the purpose of winding up its
affairs
in an orderly manner, liquidating its assets and satisfying the
claims
of its creditors. The Managers shall be responsible for overseeing the
winding
up and liquidation of the Company and shall cause the Company to (a)
sell
or otherwise liquidate all of the Company's assets as promptly as
practicable,
except to the extent the Managers determine to distribute any
assets
to the Economic Interest Holders in kind, (b) allocate any Net Profits
or
Net Losses resulting from such sales to the Economic Interest Holders'
Capital
Accounts in accordance with this Agreement, (c) discharge or make
reasonable
provision for all liabilities of the Company, including all
liabilities
to the Managers, the Members and the Economic Interest Holders to
the
extent permitted by law (other than liabilities for unpaid distributions
to
Economic Interest Holders and former Economic Interest Holders under the
Act),
and all costs relating to the dissolution, winding up, and liquidation
and
distribution of assets, (d) establish such reserves as may be reasonably
necessary
to provide for contingent liabilities of the Company (for purposes
of
determining the Capital Accounts of the Economic Interest Holders, the
amounts
of such reserves shall be deemed to be an expense of the Company),
(e)
discharge or make reasonable provision for any remaining liabilities of
the
Company to the Economic Interest Holders, other than on account of their
interests
in Company capital or profits, and to the Managers, and (f)
distribute
the remaining assets to the Economic Interest Holders in the
manner
specified in Section 10.4.
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<PAGE>
10.4 LIQUIDATING DISTRIBUTIONS TO
ECONOMIC INTEREST HOLDERS. The
remaining
assets of the Company shall promptly be distributed to the Economic
Interest
Holders in accordance with Section 6.8, after taking into account
income
and loss allocations for the Company's taxable year during which the
liquidation
occurs.
10.5 DISTRIBUTIONS IN KIND. Any non-cash
asset distributed to one or
more
Economic Interest Holders shall first be valued at its Fair Market Value
to
determine the Net Profit or Net Loss that would have resulted if that
asset
had been sold for that value, the Net Profit or Net Loss shall then be
allocated
pursuant to Article VI, and the Economic Interest Holders' Capital
Accounts
shall be adjusted to reflect those allocations. The amount
distributed
and charged to the Capital Account of each Economic Interest
Holder
receiving an interest in the distributed asset shall be the Fair
Market
Value of the interest (net of any liability secured by the asset that
the
Member assumes or takes subject to). The Fair Market Value of that asset
shall
be determined by the Managers.
10.6 PROVISION FOR DEBTS AND
LIABILITIES. The payment of a debt or
liability,
whether the whereabouts of the creditor is known or unknown, has
been
adequately provided for if the payment has been provided for by either
of
the following means:
(a) payment has been assumed or
guaranteed in good faith by one
or
more financially responsible Persons or by the United States government or
any
agency thereof, and the provision, including the financial responsibility
of
the Person, was determined in good faith and with reasonable care by the
Managers
to be adequate at the time of any distribution of the assets
pursuant
to this Section; or
(b) the amount of the debt or
liability has been deposited as
provided
in Title 12, Section 1197 of the Delaware Code.
This Section 10.6 shall not
prescribe the exclusive means of
making
adequate provision for debts and liabilities.
10.7 NO LIABILITY. Notwithstanding
anything to the contrary in this
Agreement,
upon a liquidation within the meaning of Section
1.704-1(b)(2)(ii)(g)
of the Treasury Regulations, if any Economic Interest
Holder
has a negative deficit Capital Account balance (after giving effect to
all
contributions, distributions, allocations and other Capital Account
adjustments
for all taxable years, including the year during which such
liquidation
occurs), neither that Economic Interest Holder nor the Managers
shall
have any obligation to make any contribution to the capital of the
Company,
and the negative balance of that Economic Interest Holder's Capital
Account
shall not be considered a debt owned by that Economic Interest Holder
or
the Managers to the Company or to any other person for any purpose
whatsoever.
10.8 LIMITATIONS ON PAYMENTS MADE IN
DISSOLUTION. Except as otherwise
specifically
provided in this Agreement, each Economic Interest Holder shall
be
entitled to look only to the assets of the Company for the return of that
Economic
Interest Holder's positive Capital Account balance and shall have no
recourse
for its Capital Contributions and/or share of Net Profits (upon
dissolution
or otherwise) against the Managers or any other Economic Interest
Holder.
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<PAGE>
10.9 CERTIFICATE OF CANCELLATION. Upon
completion of the winding up of
the
Company's affairs, the Managers shall file a Certificate of Cancellation
with
the Delaware Secretary of State.
10.10 COMPENSATION FOR SERVICES. The
Managers shall be entitled to
reasonable
compensation from the Company for their services in winding up the
affairs
of the Company.
ARTICLE XI
LIMITATION OF LIABILITY; STANDARD OF
CARE; INDEMNIFICATION
11.1 LIMITATION OF LIABILITY. The debts,
obligations and liabilities
of
the Company, whether arising in contract, tort or otherwise, shall be
solely
the debts, obligations and liabilities of the Company, and no Member,
Economic
Interest Holder, Manager or officer of the Company shall be
obligated
personally for any such debt, obligation or liability of the
Company
solely by reason of being a Member, Economic Interest Holder, Manager
and/or
officer.
11.2 STANDARD OF CARE. Neither the
Managers nor any Member or officer
of
the Company shall have any personal liability whatsoever to the Company or
to
any Member, Economic Interest Holder or Affiliate of the Company or to any
Affiliate
or constituent owner of any Member or Economic Interest Holder on
account
of such Person's status as the Manager or as a Member or officer of
the
Company or by reason of such Person's acts or omissions in connection
with
the conduct of the business of the Company so long as such Person acts
in
good faith for a purpose which the Person reasonably believes to be in, or
not
opposed to, the best interests of the Company; provided, however, that
nothing
contained herein shall protect any such Person against any liability
to
which such Person would otherwise be subject by reason of (a) any act or
omission
of such Person that involves actual fraud or willful misconduct or
(b)
any transaction from which such Person derives any improper personal
benefit.
11.3 INDEMNIFICATION. The Company shall
indemnify and hold harmless
any
Person made, or threatened to be made, a party to an action or
proceeding,
whether civil, criminal or investigative (a "proceeding"),
including
an action by or in the right of the Company, by reason of the fact
that
such Person was or is a Manager, a Member (including in the capacity of
the
Tax Matters Partner) or an officer of the Company, an Affiliate of a
Manager,
a Member or an officer of the Company, or an officer, director,
shareholder,
partner, member, employee, manager or agent of any of the
foregoing,
against all judgments, fines, amounts paid in settlement and
reasonable
expenses (including investigation, accounting and attorneys' fees)
incurred
as a result of such proceeding, or any appeal therein (and
including,
without limitation, indemnification against active or passive
negligence,
gross negligence or breach of duty) if such Person acted in good
faith,
for a purpose which he reasonably believed to be in, or not opposed
to,
the best interests of the Company and in criminal proceedings, in
addition,
had no reasonable cause to believe that his conduct was unlawful.
The
termination of any such civil or criminal proceeding by judgment,
settlement,
conviction or upon a plea of nolo contendere, or its equivalent,
shall
not in itself create a presumption that any such Person did not act in
good
faith, for a purpose which he reasonably believed to be in, or not
opposed
to, the best interests of the Company or that he had reasonable cause
to
believe that his conduct was unlawful; provided only that no such Person
shall
be indemnified or held harmless if and to the extent that the liability
sought
to be
30
<PAGE>
indemnified
or held harmless against results from (a) any act or omission of
such
Person that involved actual fraud or willful misconduct or (b) any
transaction
from which such Person derived improper personal benefit. The
Company's
indemnification obligations hereunder shall survive the termination
of
the Company. Each indemnified Person shall have a claim against the
property
and assets of the Company for payment of any indemnity amounts from
time
to time due hereunder, which amounts shall be paid or properly reserved
for
prior to the making of distributions by the Company to the Members.
11.4 CONTRACT RIGHT; EXPENSES. The right
to indemnification conferred
in
this Article XI shall be a contract right and shall include the right to
require
the Company to advance the expenses incurred by the indemnified
Person
in defending any such proceeding in advance of its final disposition;
provided,
however, that, if the Act so requires, the payment of such expenses
in
advance of the final disposition of a proceeding shall be made only upon
receipt
by the Company of an undertaking, by or on behalf of the indemnified
Person,
to repay all amounts so advanced if it shall ultimately be determined
that
such Person is not entitled to be indemnified under this Article XI or
otherwise.
11.5 INDEMNIFICATION OF EMPLOYEES AND
AGENTS. The Company may, to the
extent
authorized from time to time by the Managers, grant rights to
indemnification
and to advancement of expenses to any employee or agent of
the
Company to the fullest extent of the provisions of Sections 11.3 and 11.4
with
respect to the indemnification and advancement of expenses of the
Managers,
the Members and/or the officers of the Company.
11.6 NONEXCLUSIVE RIGHT. The right to
indemnification and the payment
of
expenses incurred in defending a proceeding in advance of its final
disposition
conferred in this Article XI shall not be exclusive of any other
right
which any Person may have or hereafter acquire under any statute or
agreement,
or under any insurance policy obtained for the benefit of the
Managers,
the Members and/or the officers of the Company.
11.7 SEVERABILITY. If any provision of
this Article XI is determined
to
be unenforceable in whole or in part, such provision shall nonetheless be
enforced
to the fullest extent permissible, it being the intent of this
Article
XI to provide indemnification to all Persons eligible hereunder to
the
fullest extent permitted under law.
11.8 INSURANCE. The Managers may cause
the Company to purchase and
maintain
insurance on behalf of any Person (including, without limitation,
the
Managers or any Member or officer of the Company) who is or was an agent
of
the Company against any liability asserted against that Person and
incurred
by that Person in any such capacity or arising out of that Person's
status
as an agent, whether or not the Company would have the power to
indemnify
that Person against liability under the provisions of Sections 11.3
and
11.4 or under applicable law.
ARTICLE XII
REPRESENTATIONS OF THE
MEMBERS
Each Member represents and warrants to
the other Members and the
Company
as follows:
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12.1 PREEXISTING RELATIONSHIP OR
EXPERIENCE. (a) The Member has a
preexisting
personal or business relationship with the Company or one or more
of
its Managers, officers or control persons or (b) by reason of the Member's
business
or financial experience, or by reason of the business or financial
experience
of the Member's financial advisor who is unaffiliated with and who
is
not compensated, directly or indirectly, by the Company or any Affiliate
or
selling agent of the Company, the Member is capable of evaluating the
risks
and merits of an investment in its Membership Interest and of
protecting
the Member's own interests in connection with the investment.
12.2 ACCESS TO INFORMATION. The Member
has had an opportunity to
review
all documents, records and books pertaining to this investment and has
been
given the opportunity to consult with counsel of his or her choice with
respect
to all aspects of this investment and the Company's proposed business
activities.
Such Member has personally met with the Managers and has been
provided
with such information as may have been requested and has at all
times
been given the opportunity to obtain additional information necessary
to
verify the accuracy of the information received and the opportunity to ask
questions
of and receive answers from the Managers concerning the terms and
conditions
of the investment and the nature and prospects of the Company's
business.
12.3 ECONOMIC RISK. The Member is
financially able to bear the
economic
risk of an investment in its Membership Interest, including the
total
loss thereof.
12.4 INVESTMENT INTENT. The Member is
acquiring its Membership
Interest
for investment purposes and for the Member's own account only and
not
with a view to, or for sale in connection with, any distribution of all
or
any part of its Membership Interest. Except for the partners or members of
the
Member, no other Person will have any direct or indirect beneficial
interest
in, or right to, its Membership Interest.
12.5 CONSULTATION WITH ATTORNEY. The
Member has been advised to
consult
with its own attorney regarding all legal and tax matters concerning
an
investment in its Membership Interest and has done so to the extent it
considers
necessary.
12.6 PURPOSE OF ENTITY. If the Member is
a corporation, partnership,
limited
liability company, trust or other entity, it was not organized for
the
specific purpose of acquiring its Membership Interest.
12.7 RESIDENCY. The Member is a resident
of the state of California.
12.8 NO ADVERTISING. The Member has not
seen, received or been
solicited
by any leaflet, public promotional meeting, newspaper or magazine
article
or advertisement, radio or television advertisement or any other form
of
advertising or general solicitation with respect to the sale of its
Membership
Interest.
12.9 MEMBERSHIP INTEREST IS RESTRICTED
SECURITY. The Member
understands
that its Membership Interest, including the Economic Interest
constituting
a part thereof, is a "restricted security" under the Securities
Act
in that the Membership Interest will be acquired from the Company in a
transaction
not involving a public offering, that its Membership Interest and
the
Economic Interest constituting a part thereof may be resold without
registration
under the
32
<PAGE>
Securities
Act only in certain limited circumstances and that otherwise its
Membership
Interest and such Economic Interest must be held indefinitely.
12.10 NO REGISTRATION OF MEMBERSHIP
INTEREST. The Member acknowledges
that
its Membership Interest has not been registered under the Securities Act
or
qualified under any state securities law in reliance, in part, upon its
representations,
warranties and agreements herein.
12.11 ORGANIZATION. The Member is duly
organized and validly existing
under
the laws of its jurisdiction of formation, with full corporate or
limited
liability company power to carry on its business as now or proposed
to
be conducted.
12.12 AUTHORITY. The Member has full
power and authority to enter into
this
Agreement and has taken all action required to authorize the execution,
delivery
and performance of this Agreement.
12.13 ENFORCEABILITY. This Agreement
constitutes the legal, valid and
binding
obligation of the Member, enforceable against the Member in
accordance
with its terms, except as the enforcement thereof may be limited
by
bankruptcy, insolvency, reorganization, moratorium or similar laws
relating
to or limiting creditors' rights generally and subject to the
availability
of equitable remedies.
12.14 NO VIOLATION. None of the
execution, delivery or performance by
the
Member of this Agreement will: (a) violate any provision of the
Certificate
of Incorporation, Certificate of Formation, bylaws, operating
agreement
or other charter documents of the Member; (b) violate, or
constitute
a default under any contract or agreement to which the Member or
any
of its properties is subject or bound; or (c) violate any law or order to
which
the Member or any of its properties is subject.
ARTICLE XIII
MISCELLANEOUS
13.1 LEGAL COUNSEL. The Members
acknowledge that Loeb & Loeb LLP is
counsel
to Onlinefilmsales with respect to this Agreement and the
transactions
contemplated herein and that Loeb & Loeb LLP may in the future
represent
the Company in connection with its business and affairs. The
Members
further acknowledge that Katz, Golden & Sullivan, LLP has been
counsel
to MediaChase and the Company and that Katz, Golden & Sullivan, LLP
may
in the future represent the Company in connection with its business and
affairs.
MediaChase hereby consents to Loeb & Loeb LLP's representation of
Onlinefilmsales
with respect to this Agreement and the transactions
contemplated
herein and also consents to Loeb & Loeb LLP's representation of
the
Company in the future. Onlinefilmsales hereby consents to Katz, Golden &
Sullivan,
LLP's representation of MediaChase and the Company with respect to
this
Agreement and the transactions contemplated herein and also to its
representation
of the Company in the future. Without limiting the generality
of
the foregoing, MediaChase and Onlinefilmsales agree that Loeb & Loeb LLP
and
Katz, Golden & Sullivan, LLP may, notwithstanding any past existing or
future
representation of Onlinefilmsales or MediaChase, respectively, or any
information
or experience obtained by Loeb & Loeb LLP or Katz, Golden &
Sullivan,
LLP in any such
33
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representation,
represent Onlinefilmsales or MediaChase and/or their
respective
Affiliates, respectively, in connection with any future
litigation,
reference or other proceeding or dispute which may arise from or
relate
to this Agreement or the transactions contemplated herein, hereby
waiving
any rights it may have to object to such representation under any and
all
circumstances. Such consent is freely given by MediaChase and
Onlinefilmsales
after full consideration of its consequences and after
consultation
with independent legal counsel of its respective choice.
13.2 AMENDMENTS. No amendment to this
Agreement may be made without
compliance
with Section 5.3(g). All amendments to this Agreement must be in
writing.
13.3 OFFSET PRIVILEGE. The Company may
offset against any monetary
obligation
owing from the Company to any Member, Economic Interest Holder or
Manager
any monetary obligation then owing from that Member, Economic
Interest
Holder or Manager to the Company.
13.4 ARBITRATION.
(a) GENERAL. In the event of any
dispute, claim or controversy
among
the parties arising out of or relating to this Agreement or the
Certificate
of Formation whether in contract, tort, equity or otherwise, and
whether
relating to the meaning, interpretation, effect, validity,
performance
or enforcement of this Agreement or the Certificate of Formation,
such
dispute, claim or controversy shall be resolved by and through an
arbitration
proceeding to be conducted under the auspices and the commercial
arbitration
rules of the American Arbitration Association (or any like
organization
successor thereto) at Los Angeles, California. The arbitrability
of
the dispute, claim or controversy shall likewise be determined in the
arbitration.
The arbitration proceeding shall be conducted in as expedited a
manner
as is then permitted by the commercial arbitration rules (formal or
informal)
of the American Arbitration Association. Both the foregoing
agreement
of the parties to arbitrate any and all such disputes, claims and
controversies,
and the results, determinations, findings, judgments and/or
awards
rendered through any such arbitration shall be final and binding on
the
parties and may be specifically enforced by legal proceedings in any
court
of competent jurisdiction.
(b) GOVERNING LAW. The
arbitrator(s) shall follow any applicable
federal
law and Delaware state law (with respect to all matters of
substantive
law) in rendering an award.
(c) COSTS OF ARBITRATION. The cost
of the arbitration proceeding
and
any proceeding in court to confirm or to vacate any arbitration award, as
applicable
(including, without limitation, each party's attorneys' fees and
costs),
shall be borne by the unsuccessful party or, at the discretion of the
arbitrator(s),
may be prorated between the parties in such proportion as the
arbitrator(s)
determine(s) to be equitable and shall be awarded as part of
the
arbitrators' award.
13.5 REMEDIES CUMULATIVE. Except as
otherwise provided herein, the
remedies
under this Agreement are cumulative and shall not exclude any other
remedies
to which any Person may be lawfully entitled.
13.6 NOTICES. Any notice to be given to
the Company or any Member,
Economic
Interest Holder or Manager in connection with this Agreement must be
in
writing and will be deemed to have been given and received when delivered
to
the address specified by the party to
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receive
the notice by courier or other means of personal service, when
received
if sent by facsimile, or three (3) days after deposit of the notice
by
first class mail, postage prepaid, or certified mail, return receipt
requested.
Any such notice must be given to the Company at its principal
place
of business, and to any Member, Economic Interest Holder or Manager at
the
address specified in Exhibit A. Any party may, at any time by giving five
(5)
days' prior written notice to the other parties, designate any other
address
as the new address to which notice must be given.
13.7 ATTORNEYS' FEES. Subject to the
provisions of Section 13.4
requiring
that disputes be submitted to arbitration, in the event that any
dispute
between the Company and/or the Members or Economic Interest Holders
and/or
the Managers should result in litigation, the prevailing party in that
dispute
shall be entitled to recover from the other party all reasonable
fees,
costs and expenses of enforcing any right of the prevailing party,
including
without limitation, reasonable attorneys' fees and expenses.
13.8 GOVERNING LAW; JURISDICTION. The
Agreement shall be governed by
and
construed in accordance with the laws of the State of Delaware, without
regard
to any conflicts of laws principles of the State of Delaware or any
other
jurisdiction that would call for the application of the law of any
jurisdiction
other than the State of Delaware. Subject to the requirement
that
all disputes are to be submitted to arbitration pursuant to Section
13.4,
each Member, Economic Interest Holder and Manager consents to the
exclusive
jurisdiction of the federal courts sitting in Los Angeles,
California,
in any action on a claim arising out of, under or in connection
with
this Agreement or the transactions contemplated by this Agreement. Each
Member,
Economic Interest Holder and Manager further agrees that personal
jurisdiction
over it may be effected by service of process by registered or
certified
mail addressed as provided in Section 13.6 and that when so made
shall
be as if served upon it personally.
13.9 COMPLETE AGREEMENT. This Agreement,
the Certificate of Formation,
the
MediaChase Consulting Agreement and all of the other agreements or
instruments
entered into by any Member in connection with the consummation of
the
transactions contemplated hereby constitute the complete and exclusive
statement
of agreement among the Members, Economic Interest Holders and
Managers
with respect to their respective subject matters and supersede all
prior
written and oral agreements or statements by and among the Members,
Economic
Interest Holders and Managers. No representation, statement,
condition
or warranty not contained in any such agreement shall be binding on
the
Members, Economic Interest Holders or Managers or have any force or
effect
whatsoever.
13.10 NO THIRD-PARTY RIGHTS. No Person
other than a Member, an
Economic
Interest Holder, a Manager or a Person entitled to indemnification
pursuant
to Article XI shall have any legal or equitable right, remedy or
claim,
or be a beneficiary, under or in respect of this Agreement.
13.11 BINDING EFFECT. Subject to the
provisions of this Agreement
relating
to Transferability, this Agreement shall be binding upon and inure
to
the benefit of the Members, Economic Interest Holders and Managers and
their
respective successors and assigns.
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13.12 SECTION HEADINGS. All Section
headings are inserted only for
convenience
of reference and are not to be considered in the interpretation
or
construction of any provision of this Agreement.
13.13 INTERPRETATION. In the event any
claim is made by any Member,
Economic
Interest Holder or Manager relating to any conflict, omission or
ambiguity
in this Agreement, no presumption or burden of proof or persuasion
shall
be implied by virtue of the fact that this Agreement was prepared by or
at
the request of a particular Member or Manager or that Member's, Economic
Interest
Holder's or Manager's counsel.
13.14 SEVERABILITY. If any provision of
this Agreement or the
application
of that provision to any person or circumstance shall be held
invalid,
the remainder of this Agreement or the application of that provision
to
persons or circumstances other than those to which it is held invalid
shall
not be affected.
13.15 MULTIPLE COUNTERPARTS. This
Agreement may be executed in two or
more
counterparts, each of which shall be deemed an original, but all of
which
shall constitute one and the same instrument.
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IN WITNESS WHEREOF, all of the Members and
the Managers of the
Company
have executed this Agreement, effective as of the date first written
above.
MEMBERS: